MIME-Version: 1.0
Content-Type: multipart/related; boundary="----=_NextPart_01C8BA70.2B505E90"
Este documento es una página Web de un solo archivo, también conocido como archivo de almacenamiento Web. Si está viendo este mensaje, su explorador o editor no admite archivos de almacenamiento Web. Descargue un explorador que admita este tipo de archivos, como Windows® Internet Explorer®.
------=_NextPart_01C8BA70.2B505E90
Content-Location: file:///C:/0D821E52/Ecuador.htm
Content-Transfer-Encoding: quoted-printable
Content-Type: text/html; charset="us-ascii"
Doing Business In (Insert Country Name Here)
<=
/span>
DOI=
NG
BUSINESS IN ECUADOR:
A
COUNTRY COMMERCIAL GUIDE
ECU=
ADOR
200=
7
=
“International
Copyright
=
U.S.
& Foreign Commercial Service and
=
The U.S.
Department of State, 2007
=
All
rights reserved outside the United States”
&=
nbsp;
U.S. exporters seeking gene=
ral
export information and assistance or country-specific commercial information
should consult with their nearest export assistance center or the U.S.
Department of Commerce’s Trade Information Center at (800) USA-TRADE,=
or
go to one of the following web sites: ww=
w.buyusa.gov
or www.export.gov.=
Doing Bus=
iness In
Ecuador: A Country Commercial Guide for U.S. Companies
TABLE OF CONTENTS
INTERNATIONAL COPYRIGHT, U.S. & FOREI=
GN COMMERCIAL
SERVICE AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED OUTSIDE OF =
THE
UNITED STATES.
Market Overview &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Ecuador is politically unstable.It has had eight presidents since =
1996
(twelve, if a triumvirate that lasted only hours and a president who was sw=
ept
aside after a day are counted).President Correa assumed office in January 2007.His immediate predecessor, Preside=
nt
Palacio, assumed office when then-President Gutierrez was forced to flee the
country by street demonstrations.President Gutierrez had been elected fifteen months earlier in free =
and
fair elections.After two decades of civilian rule,
Ecuador's political institutions remain fragile. Despite its impress=
ive
wealth of natural resources and other advantages, Ecuador is impoverished a=
s a
result of years of political mismanagement and staggering corruption.Transparency International ranks E=
cuador
as the fourth most corrupt country in South America.There are few effective checks or
balances in place to deter corruption.
<=
o:p>
In 2005, Ecuador’s economy ex=
panded
at a 4.4% rate.As a result of
rapid economic growth in the last three years, Ecuador’s GDP has rega=
ined
levels last seen in 1998.In =
1999
and 2000, Ecuador’s economy collapsed spectacularly, precipitating the
adoption of the U.S. dollar as legal tender.Today, all commerce is conducted i=
n the
dollar, and currency risk is absent.
Ecuador is a membe=
r of the
Andean Community, ALADI (Latin American Integration Association) and the
WTO.Ecuador has liberalized =
its
trade regime since 1990, resulting in a reduction of tariffs, elimination of
most non-tariff surcharges, and enactment of an in-bond processing industry
law.It is relatively open to=
U.S.
exports and direct investment. In
addition, Ecuador has concluded bilateral free trade agreements with Colomb=
ia,
Bolivia, Peru, Venezuela and Chile.
<=
/span>
When Ecuador joine=
d the
WTO in January of 1996, the country set most of its tariff rates at 30 perc=
ent
or less.Ecuador’s aver=
age
applied tariff rate is about 11.9 percent ad valorem.In addition to import duties, all
imports are subject to a 12 percent value-added tax and other assessments in
lesser amounts.Many products enter the market without paying legally required
tariffs and taxes.
Since
1994, Ecuador has employed a pre-shipment inspection regime.All Ecuadorian imports and exports=
are
subject to inspection by authorized international verification companies
operating in the country.Inspection of goods, which are appraised for value, quantity, qualit=
y,
and weight, may result in excessive delays in the shipment process.
Foreign profession=
als are
subject to national licensing legislation.=
Foreign insurance companies may not present offers on government
tenders.Maritime transport s=
ervices
are generally open, subject to reciprocity with other countries.
Ecuador is highly receptive to U.S.
products and services, which locally enjoy a reputation for high quality and
reliability.With a few notab=
le
exceptions (especially white goods), U.S. standards are accepted with
relatively simple registration procedures required before entering the mark=
et.
Market Challenges &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
In
1999 and 2000, Ecuador’s banking sector suffered a liquidity crisis,
forcing the government to assume control of twenty defaulting commercial
banks.As a consequence, banks
representing 60% of the market were intervened by Ecuador’s
government.In the course of =
the
financial collapse, trade credits in the banking system were not honored,
resulting either in non-payment or delayed payment at deep discounts.Many U.S. banks and exporters reco=
vered
cents on the dollar.The
Export-Import Bank of the United States is owed significant amounts, and
remains closed for exports to Ecuador until these debts are repaid.<=
/p>
Letters of credit are difficult=
to
obtain.Most banks abroad wil=
l not
accept Letters of Credit connected to Ecuadorian banks.Credit card orders are popular amo=
ng
small importers, and cash transactions have become increasingly common. Two
international banks – Citibank and Lloyds TSB – maintain operat=
ions
in Ecuador, serving as reliable financial intermediaries for those clients
averse to risk within the financial system.
<=
/span>
Ecuador’s
complicated legal and regulatory regime may impose additional non-tariff
barriers, increasing the difficulty and cost of doing business in the count=
ry.
<=
/span>
Sanitary registry
legislation provides for equal treatment, recognition and validation of
sanitary registration, and free sale certificates from countries authorized=
by
the Ministry of Health.The l=
aw
mandates better expiration terms, a decentralized process, a requirement to
issue sanitary permits within 30 days upon receipt of the request, and
reduction in the number of documents required to obtain a permit.In practice, it is difficult to obtain sanitary registration using U.S.
documentation.Non-transparent
procedures and inefficiency in the sanitary registration process have delay=
ed
and blocked imports of some U.S. products.
The principal difficulty faced by foreign firms in the Ecuador=
ian
marketplace is weakness in the rule of law.Processing delays and unpredictable judgments in civil and commercial
cases plague Ecuador’s judicial system.As is the case in many developing =
economies,
Ecuador does not have a reputation of always enforcing contractual commitme=
nts,
ensuring that judges are free from external influence, providing a stable a=
nd
predictable regulatory environment, or paying on time and in the amounts
previously agreed.Six execut=
ives
of U.S. firms were ordered arrested in 2001, although all six arrest orders=
were
eventually voided as illegal. Only
one executive of a U.S. firm was ordered arrested in 2006, and this order w=
as
also eventually dropped.
As is true in many countries around the world, the interest of
officials responsible for government procurement contracts may not center on
the requirements established by law.The Commercial Section of the U.S. Embassy encourages U.S. companies
interested in government contracts, or in business activities requiring gov=
ernment
licensing or approvals, to consult with us early in the process.
Despite record high oil prices,
Ecuador has not benefited from its oil wealth as it should.Unfavorable economic terms, legal
uncertainties, tax policies, environmental liability concerns, outdated
protectionist arguments and a lack of a coherent energy policy are some of =
the
reasons the country has been unable to take advantage of historically high =
oil
prices.High profile legal ca=
ses
brought by and against foreign oil companies have also dampened foreign
investor interest in the sector. In
2006, Ecuador declared the concession contract of Occidental Petroleum void=
and
took possession of their investment.Occidental has initiated arbitration under the Bilateral Investment
Treaty between Ecuador and the United States to recover their assets.<=
/o:p>
In July 2006, Ecuador amended its
Hydrocarbons Law to unilaterally modify the terms of oil production sharing
contracts already in place.T=
his
law increases the royalty payment due to the Ecuadorian Government by
referencing the price of oil when the contract was signed, and defining any
price increase since as an extraordinary gain.From the date of the amendment, the
Ecuadorian Government is due at least 50 percent of the extraordinary reven=
ue
arising from actual production multiplied by the price differential.=
Foreign
investment in petroleum has been moribund for several years now, and will
likely remain so until investors’ confidence in the transparency and
predictability of the investment regime is restored.
The electric power sector is
chronically short of cash due to mismanagement and “black” loss=
es
in transmission and distribution.(“Systemic” losses are due to inefficiencies in the power
distribution grid, while “black” losses are non-technical reven=
ue
shortfalls caused by theft and inefficient metering and billing systems.)
All
power distributors are state-owned; all lose money during at least part of =
the
year, and are therefore unable to pay power generators.Many are technically bankrupt year=
-round
and depend entirely on central government bailouts.Electricity generators, incl=
uding
U.S. companies, face chronic problems in collecting accounts receivables fr=
om
power distributors.
Market Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Best prospects for U.S. exports are=
in
travel and tourism, port equipment, infant care equipment, pumps, valves and
compressors, franchising, and life insurance services.The United States continues to be =
the
preferred destination for Ecuadorian travelers.Ecuador is ranked 31st
among nations visiting the United States, with about 143,000 Ecuadorians
visiting the U.S. in 2005 and 145,000 in 2006.The average stay is 8 days, with an
approximate daily expenditure of$200.00.The number of
Ecuadorian citizens visiting the U.S. is expected to grow 3% for 2007.
All four
major ports in Ecuador plan to sell concessions and/or modernize their
infrastructure. Manta and Esmeraldas have already signed 30 and 25-year
concession contracts, respectively. However, political instability in recent
years has slowed down and at times stopped the concession process for Guaya=
quil
and Puerto Bolivar. Both have plans to resume the concession process during
2007. In all four cases there are good opportunities for U.S. companies sel=
ling
port equipment.
The
demand for infant care equipment is driven by the need to replace obsolete
equipment and to serve a population growing at a rate of 1.5% annually. The largest market sector is represented by public hospitals th=
at
provide services to approximately 80 percent of end users.The U.S. is the dominant supplier of i=
nfant
care equipment in Ecuador, with strong competition from Germany, UK,
Switzerland, Brazil, and Argentina.The market is expected to grow at a 5% rate during 2008.
The United States is the =
largest
provider of pumps, valves and compressors (PVC) to Ecuador. Demand for PVC =
is
driven by the oil and gas industries and the water sector. Principal
competitors are companies from Italy, Brazil and China – there is no
domestic production beyond iron gate valves and bronze seals.The best prospects here are for th=
e sale
of centrifugal, turbine and fuel injection pumps, air or vacuum pumps, air =
or
other gas compressors, refrigerating and air conditioning compressors, and a
range of valves including pressure-reducing, check, automatic and globe val=
ves.
Ecuador’s
franchise industry has expanded rapidly since 1994, and offers new and
challenging markets for U.S. service franchises.Industry sources estimate the mark=
et
will continue to grow at a rate of 8-10% over the next three years from a 2=
006
base of $848 million.There a=
re
approximately 150 franchises in Ecuador of which about half are from the U.=
S.
and 87% are foreign.Best pro=
spect
franchises include services in general such as education and training, clea=
ning
services, information technology, retail, gifts, courier services, apparel,
cosmetics, and entertainment.
The total life insurance
market is estimated at USD 46 million, of which USD 8 million is served by
offshore companies.Projections estimate life insurance will grow by 20 percent an=
nually
over the next two years.The best prospect in the =
life
insurance sub-sector is individual life insurance, although sales growth has
been constrained by the assessment of a 12% value added (IVA) tax on indivi=
dual
life policies.
The best
prospects for U.S. sale of agricultural products are in wheat, corn, soybean
meal, cotton, consumer-ready foods and fresh fruit.
&n=
bsp;
Market Entry Strategy=
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
The traditional entry strategy is to
first appoint an agent or stocking distributor, and when sales have grown
sufficiently to enter on your own account.=
Few U.S. companies have taken the second step due to Ecuador’s=
relatively
small economy.Colombia and P=
eru
have negotiated free trade agreements with the United States, which have not
yet been approved by the U.S. Congress.&nb=
sp;
If these FTAs are approved, opportunities will eventually arise to
establish a single, regional base from which to manage all three markets, i=
ncluding
Ecuador’s.While Ecuador
appears unlikely to negotiate a similar agreement with the U.S., over time
Ecuador will likely adjust its laws and regulations to approximate those of
Colombia and Peru to facilitate regional trade and investment.Until then, market entry in Ecuado=
r will
continue to be based on the national market alone.
When negotiating an agent or
distributor agreement with an Ecuadorian counter-party, there are many
dimensions to take into account.The Commercial Service strongly recommends that U.S. firms consider
conceding some ground on quantities, delivery timing, price, shared marketi=
ng
expense or training, and holding the line firmly on which law governs
contracts, the selection of financial intermediaries, and credit.
To the extent practical, U.S. companies are encouraged to base
contracts on U.S. law, to allow counter-parties to act as importer of recor=
d by
selling on U.S. territory, to structure transactions to minimize the risk of
non-payment, and to exercise judgment in extending credit.In an increasing number of instanc=
es,
foreign companies are successfully configuring transactions to reduce legal=
and
payment risk, to the extent of routing routine payments through escrow acco=
unts
based in the United States.
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
INTERNATIONAL COPYRIGHT, U.S. & FOREI=
GN
COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED
OUTSIDE OF THE UNITED STATES.
For bac=
kground
information on the political and economic environment of the country, please
click on the link below to the U.S. Department of State Background Notes.
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Using an Agent or Distributor &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return
to top=
The Pri=
ncipal -
Agent Relationship
&n=
bsp;
When appointing a local distributor,
U.S. firms should seek counsel from an Ecuadorian law firm to ensure th=
at
their distribution agreements provide appropriate protection.It is advisable to appoint non-exc=
lusive
representatives for a limited period of time, and to include an internation=
al
arbitration clause as a means to resolve any disputes that may arise.Enforcing legal rights in Ecuador,=
as is
the case in many other Latin American countries, remains problematic for a
plethora of reasons; it is strongly recommended that American companies ens=
ure
that U.S. law governs in any contract, and that payments are routed through
reliable financial intermediaries.
When negotiating an agent or
distributor agreement with an Ecuadorian counter-party, there are many
dimensions to consider.Based=
on
the experience of U.S. firms trading with and investing in Ecuador, the
Commercial Section strongly recommends that U.S. firms consider conceding s=
ome
ground on quantities, delivery timing, price, shared marketing expense or
training, and holding the line firmly on which law governs contracts, the
selection of financial intermediaries, and credit.
Finding a Partner=
&n=
bsp;
American firms have many options, i=
ncluding
local lawyers, consultants, and banks, when searching for a suitable local
agent or distributor.The U.S.
Commercial Service of the American Embassy offers a customized search progr=
am
for interested U.S. exporters.
Establishing an Office &=
nbsp; &nbs=
p; &=
nbsp; &=
nbsp; &nbs=
p; Return
to top=
The procedure for establishing an office is usually entrusted =
to l=
ocal lawyers,
international accounting firms, or professional advisers.Costs vary depending on the size o=
f the
company's capital share.Fore=
igners
may own 100 percent of an Ecuadorian enterprise in most industry sectors.
Foreign investors starting up a business in Ecuador most frequ=
ently
establish local corporations, or local branches of off-shore entities.Alternative legal entity forms inc=
lude
limited liability companies, partnerships, and mixed economy companies.Corporations, branches, limited li=
ability
companies and mixed economy companies are registered with and controlled by=
the
Superintendency of Companies, =
and
governed by the Companies Law. The
legal representative may be an Ecuadorian citizen, or a foreign national wi=
th
an Ecuadorian resident visa.
Corporations
The corporation is the most flexible form of legal entity, all=
owing
a mixture of foreign and local capital.&nb=
sp;
Private limited companies are useful as closed companies, but have
disadvantages regarding the sale and transfer of capital, and are usually n=
ot
advantageous to the foreign investor.The corporation offers the same major advantages to investors as does
the corporate form in other countries, including (1) the limitation of
shareholders' liability to the amount invested; (2) shareholders are free to
negotiate their stock without restrictions; (3) corporations are represente=
d by
managers who may be discharged at any time; and (4) continuity of the busin=
ess
as an ongoing concern is assured regardless of death or changes in manageme=
nt
or ownership.
Formation of a Corporation.&n=
bsp;
The formation of corporations and their operations are governed by t=
he Companies
Law. The documents that must accompany the deed of incorporation include the
company's by-laws, a certificate of the name of the company granted by the
Superintendency of Companies, a certificate granted by the bank where the
company has opened its capital integration account, and documents identifyi=
ng
the shareholders. The company's name must not =
be
similar to that of an existing company.&nb=
sp;
Protection of a trade name is contingent on registration with the Ecuadorian Intellectual P=
roperty
Institute (IEPI).
Capital of a Corporation.&nbs=
p;
A corporation’s capital must be specified in the by-laws, with
total value resulting from the multiplication of the number of shares by th=
eir
par value.Capital may consis=
t of
(1) authorized capital, that is, as stated in the by-laws; (2) subscribed
capital which the stockholders are required to pay in; or (3) paid-in capit=
al.The minimum capital for this type =
of
corporation is USD 10,000.
&n=
bsp;
Compani=
es must
file an annual return with the Superintendency of Companies containing
financial statements and other relevant information, as well as reportsfrom=
the
legal representative, the corporate comptroller and the external auditors.<=
span
style=3D'mso-spacerun:yes'> Companies controlled by the Superintendency of Banks are oblig=
ed to
publish their June and December financial statements in a local newspaper.<=
/span>
&n=
bsp;
Branche=
s
&n=
bsp;
To establish a branch in Ecuador, a for=
eign
company must provide (1) proof that the company has been legally establishe=
d in
its country of origin; (2) proof that according to the laws of its country =
of
origin, the company may establish branches and has the right to negotiate
abroad; (3) a permanent legal representative in Ecuador; and (4) assigned
capital of no less than USD 30,000.
&n=
bsp;
This
documentation should be presented to the Superintendency of Companies, along
with a certificate issued by the Ecuadorian Consul nearest the foreign
company's head office certifying the establishment and legality of the comp=
any
in its country of origin and that it is authorized to do business abroad. <=
/span>
&n=
bsp;
Limited=
Liability
Companies
&n=
bsp;
This ty=
pe of
corporate form closely resembles a limited partnership, and is suitable for
that type of operation.A lim=
ited
liability company is characterized by (1) having 2 or more members, not to
exceed 15; (2) the members have limited liability for company obligations u=
p to
the amount of their individual contribution; (3) foreign corporations are
excluded from membership; (4) capital cannot be less than USD 5,000, and at
least 50 percent of the capital must be paid in at the time of formation and
the remainder within one year; and (5) a legal reserve must be funded by the
transfer of 5 percent of annual profits until the reserve equals 20 percent=
of
capital.
&n=
bsp;
Mixed E=
conomy
Company
&n=
bsp;
Finally=
, a
"mixed economy" company is one with both private and public
capital.Public sector funds =
may
come from state, municipal, or provincial governments, or from legal
representatives of either public or parastatal entities.The minimum capital for this=
type
of corporation is USD 10,000.
The use of franchising has increase=
d in
Ecuador over the past eight years.There are no specific laws that regulate franchising, except for some
legal specifications established under Decision 291 of the Cartagena
Agreement.The Commercial Cod=
e, the
Civil Code, the Companies’ Law and the Intellectual Property Law gove=
rn
franchising.Franchising is
considered to be a private negotiation wherein a franchisor licenses tradema=
rks
and shares proven methods of doing business to a franchisee in excha=
nge
for a recurring payment, and usually a percentage=
of
net sales as well as annual fees.<=
span
lang=3DEN-US>The Commercial C=
ode
indicates that the commissioned merchant or agent is obligated directly and
personally for his/her own franchise as if the business were entirely
theirs.The principal and the=
agent
are totally independent even with respect to legal action, except for the
rights and obligations indicated by their mutual commission contract and the
Civil and Commercial Codes.
Further
information may be found at the web page of the Ecuadorian Franchising
Association: http://www.aefran.org./
Direct Marketing =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return
to top=
Direct =
marketing
is still limited.Consumer go=
ods,
electrical appliances, and physical fitness products are often advertised on
local and cable television, with local sale and telephone contact points
provided.A local company sto=
cks
products and fills orders, which are often delivered to the home.Cosmetics are increasingly marketed
direct to the consumer, with brands from Colombia experiencing strong market
share growth using this distribution method.Local television, i.e. Teleamazonas, Gamavision, and Telesistema, are active in dire=
ct
marketing.
Two or =
more
parties may enter into a contract to carry out a particular business activi=
ty.No obligation exists to record this
contract in the Mercantile Register.According to Ecuador’s Companies Law, a joint venture may be
considered as an association, or a participation agreement.
&n=
bsp;
Under t=
he
Companies Law a business entity may give others (associates) the right to
participate in its business, but these rights are limited to obtaining
information on the funds contributed, the profits made or losses incurred.<=
span
style=3D'mso-spacerun:yes'> Associates are not liable to third
parties.If the business ente=
rs
bankruptcy, the associates are liable only for their share of the
investment.All other matters=
are
regulated by the terms of the contract of association.
&n=
bsp;
In Ecua=
dor this
type of joint venture occurs primarily when foreign corporations are contra=
cted
as associates to carry out specific projects with government entities.It is normal for foreign corporati=
ons
entering into this type of agreement to establish a local branch.
&n=
bsp;
License=
s
&n=
bsp;
In Ecua=
dor, the Intellectual Pr=
operty
Rights Law governs licenses, patents and trademarks.Decision 486 of the Andean Communi=
ty and
the Patents, Trademarks and Licenses Law also govern licenses.Contracts for license of trademark=
s,
patents, patterns for usage, industrial designs and commercial names and lo=
gos
must be registered at the Ecuadorian Intellectual Property Institute
(IEPI).Contracts for the tra=
nsfer
of technology must be registered at the same Institute, but when they are
considered to be a foreign investment they must also be registered at the B=
anco
Central del Ecuador.
&n=
bsp;
License=
s are
granted within six months of their request.To register the use of specific br=
ands,
a notarized contract permitting brand use and a request signed by a lawyer =
must
be presented to IEPI at the following address:
Contact=
:Marco Armas, Acting Industrial Pro=
perty
Director
Web page: www.iepi.ec
Selling to the Government &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return
to top=
Ecuador is not a signatory to t=
he WTO
Agreement on Government Procurement. =
Ecuador’s 2001 Public Contract=
ing
Law regulates government procurement of goods, equipment, and
services.Purchases made by t=
he
State-owned telephone and electric power distributors, and by military-owned
companies are not required to follow this law.Foreign bidders in both cases must=
be
legally represented in Ecuador.Ecuadorian companies and those of the foreign country sponsoring the=
bid
may participate in public bids financed by government-to-government
credits.Association with an
Ecuadorian company is only required for the execution of
government-to-government public works contracts and those that are carried =
out
with direct or supplier credits. It
is only for these types of contracts that the foreign company needs to reta=
in
at least double the capital of its Ecuadorian associate.Foreign contractors may not use na=
tional
credit to execute their contracts.
&n=
bsp;
Proc=
urement by
public invitation involves various steps.&=
nbsp;
The government agency usually inserts announcements in newspapers and=
trade
journals inviting potential suppliers to present bids for specific types of
equipment or services desired. The
interested party must purchase bid documents containing detailed informatio=
n.The bids must be completed in Span=
ish,
using the format specified by the inviting agency, and be delivered to the
contracting agency in person.
&n=
bsp;
Bidd=
ing for
government contracts can be cumbersome, and competitors from other countrie=
s do
not operate under the restrictions of the U.S. Foreign Corrupt Practices
Act.There is no formal
discrimination against U.S. suppliers.
&n=
bsp;
Under t=
he Public
Contracting Law, the government requires either a bank-issued guarantee or =
an
insurance guarantee to cover 5 percent of the contract, to ensure execution=
of
the contract.(Military contr=
acts,
however, permit only bank-issued guarantees.)A guarantee of advance payments ma=
de by the
Government is also required from the supplier.Before a Government contract is ap=
proved,
it must be reviewed and authorized by both the Comptroller (Contralor) and
Solicitor General (Procurador).
&n=
bsp;
Shipmen=
ts to
Ecuadorian government agencies no longer need be made via Ecuadorian flag
vessels or airlines.
&n=
bsp;
As i=
s true in
many countries around the world, the interest of officials responsible for
government procurement contracts may not center on the requirements establi=
shed
by the bid documents or Ecuadorian law.&nb=
sp;
The Commercial Section of the U.S. Embassy encourages U.S. companies
interested in government contracts, or in business activities requiring
government licensing or approvals, to consult with us early in the process.=
Distribution and Sales Channels &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return
to top=
A lo=
cal agent
or representative is legally required for sales to the government, and is o=
ften
a practical requirement when first entering the Ecuador market.Until local sales and brand recogn=
ition
are sufficiently established to support a direct presence, most companies
minimize risk and capital required by selling to or through an Ecuadorian
representative.U.S. industri=
al
market exporters may have so few local customers that a local presence will
never be economic.These comp=
anies
often sell directly from the U.S., or through indent sales with orders take=
n by
a local or regional representative.
&n=
bsp;
Ecua=
dorian
buyers prefer to purchase directly from the manufacturer to remove
intermediaries and lower product cost.&nbs=
p;
For sales of machinery and equipment, the provision of parts and
after-sales service is a key competitive factor.
&n=
bsp;
Quito a=
nd
Guayaquil are the major distribution centers for imported products, while
Cuenca and Santo Domingo de los Colorados serve as secondary national
distribution centers. Virtually all distributors cover the entire country w=
ith
their own sales force, and most have branches and warehouses in each major
city.
&n=
bsp;
Options=
for
distribution in Ecuador include:
&n=
bsp;
Distrib=
utors
&n=
bsp;
These a=
re
commonly medium-to large-sized firms that purchase and import relatively la=
rge
quantities from foreign companies, then distribute wholesale within the
country.Distributors typical=
ly
maintain local inventories and set local prices independently of foreign
manufacturers.Distributors on
occasion place orders with foreign manufacturers for direct delivery to
in-country customers.
&n=
bsp;
Commiss=
ioned
Agents
&n=
bsp;
These a=
re usually
specialized firms or individuals that take orders in Ecuador for foreign go=
ods
by means of a well-trained and experienced sales force.Agents are paid a commission by th=
e U.S.
company filling these orders.Occasionally, agents may import goods with their own funds for resal=
e in
the local market.
&n=
bsp;
The Commercial Service can assis=
t U.S.
exporters in locating agents and distributors.
&n=
bsp;
Direct
Importers
&n=
bsp;
Direct =
importers
are generally large manufacturing companies and government agencies purchas=
ing
equipment or materials for their own use, or large retail chains with natio=
nal
distribution outlets.Purchas=
es are
normally made directly from the manufacturer.
Most U.=
S.
products do not require any changes to be readily acceptable.Price competitiveness is a very
important sales factor.For
practical rather than legal reasons, U.S. firms selling high-tech products =
must
provide training and maintenance support to their distributors and agents.<=
span
style=3D'mso-spacerun:yes'> Local distributors frequently expe=
ct
their foreign suppliers to underwrite marketing and promotion costs, as wel=
l as
sales support and training.S=
ales
materials should be in Spanish.
&n=
bsp;
Under the current invoicing system =
mandated
by Ecuador’s internal revenue service (the SRI), a sales invoice must=
be
submitted for every transaction regardless of the amount –even when carrying out a free tran=
sfer
of title.This obligation app=
lies
equally to the provision of professional services of any nature and
transactions where a 0% VAT (value added tax) rate applies.The SRI requires also requires for=
eign
suppliers to provide the Federal ID number.
Ecuador
passed an e=
lectronic
commerce law on April 17, 2002 and issued regulations to the electronic
commerce law on December 31, 2002 that make the use of electronic signature=
s in
business transactions on the Internet legally binding, and make digital the=
ft a
crime.Ecuador has initiated a
program for e-government services and universal access to information techn=
ology
through funding from international financial institutions.Electronic commerce is still devel=
oping
in Ecuador.
Trade
Promotion and Advertising =
&nb=
sp; =
&nb=
sp; Return
to top=
Adverti=
sing
&n=
bsp;
The adv=
ertising
market and the media in Ecuador are centered in Quito, Guayaquil and
Cuenca.The principal means of
advertising in Ecuador is through television.There are five national TV network=
s: Ecuavisa, Teleamazonas, Gamavision, Telesistema, TC Television and Canal Uno; four cable television netw=
orks
showing U.S. and European programming: Direct
TV, Univisa, TV Cable, and Cablevision; and a number of lo=
cal
stations in the larger cities.There are an estimated 1.8 million sets and 6.5 million viewers
nation-wide.
&n=
bsp;
The maj=
or
international advertising firms, a majority of whom originates in the U.S.,
operate in Ecuador through representation agreements.Most have their offices in Quito a=
nd
Guayaquil since the advertising market is centered in these two cities.The largest advertising agencies in
Ecuador are:
Newspapers are the second most impo=
rtant
advertising medium.Six newsp=
apers
offer nationwide circulation: El Universo (140,000 from Monday to Friday; weekends240,000); El Comercio=
(100,000 Monday to Friday; Saturday
120,000; Sunday 160,000); Hoy (60,000 Monday to Friday; Saturday
67,000; Sunday 50,000); El Telegrafo (8,000 daily); La
Hora (130,000 from Monday to Saturday; Sunday 135,000) and Expreso (92,000 from Monday to Saturday; 1=
05,000
Sunday).El
Universo is the largest circulation newspaper in Ecuador, while El Comercio=
is
the dominant paper in Quito and the surrounding highlands.
A third advertising medium is
radio.There are approximatel=
y 473
radio stations, including medium wave, short wave and FM, broadcasting to
approximately 8 million daily listeners.&n=
bsp;
There are an estimated 6.5 million radio sets in Ecuador.Radio is particularly important wh=
en
target markets include suburban and rural areas.
For Business Service Providers (BSP=
) please
click here.=
The Commercial Service provides a f=
ull
range of trade promotion services for U.S. exporters.For detailed information, please c=
ontact
the Commercial Service at=
the
U.S. Embassy in Quito, Tel:0=
11
(593-2) 256-1404 or 250-5752; Fax:011 (593-2) 250-4550.
Electri=
c power
and petroleum products like diesel, gasoline and natural gas are subject to
government price controls, as are phone tariffs and pharmaceutical
products.Prices for other imported products are defined=
by
market forces and are not subject to official price controls at this time.<=
span
style=3D'mso-spacerun:yes'>
&n=
bsp;
Ecuadorian markets are more highly
concentrated than is typical of larger, more competitive markets.In other words, relatively few pla=
yers
dominate most market sectors. This
conveys considerable pricing power to distribution companies, and creates t=
he
opportunity for collusive pricing practices.In the case of packaged consumer
products, retail chains are few in number, and well positioned.Vertical integration, where the
manufacturer controls its own distribution, is a particularly strong market=
position
to hold.Ecuador has no anti-=
trust
or competition laws.
Sales
Service/Customer Support &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return
to top=
Very few products are sold in Ecuad=
or with
warranties.The availability =
of
trained and competent service technicians, and spare parts are often key to
purchase decisions for technically sophisticated products.U.S. companies exporting products =
that
require maintenance and spare parts should ensure that their Ecuadorian
distributor provides both.
Protecting
Your Intellectual Property =
; &n=
bsp; =
; &n=
bsp; Return
to top=
Law 83 and its
Regulations govern intellectual and industrial property protection.In addition, industrial property
protection is also regulated by the following Andean Community Agreements:<=
span
style=3D'mso-spacerun:yes'> Decision 345 (Common Regimen for t=
he
Protection of Rights of Vegetable Varieties Holders), Decision 351 (Common
Regimen Regarding Author Royalties and Related Rights) and Decision 486 (Co=
mmon
Regimen Regarding Industrial Property).&nb=
sp;
In general terms, Ecuador’s legal regime offers exemplary
protection of intellectual property.However, implementation of legal protections falls well short of the
letter of the law.For further
information on IPR protection, see Chapter VI.
Due
Diligence &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return
to top=
In
performing due diligence, U.S. companies should seek the services of a
reputable local lawyer. A list
of lawyers for Quito and Guayaquil is available at the Commercial Servi=
ce
in the U.S. Embassy, Tel: 011 (593-2) 256-1404 or 250-5752; Fax: 011 (593-2)
250-4550.
Local Professional Services &nb=
sp; =
&nb=
sp; =
&nb=
sp; Return
to top=
A list
of local service providers and professional associations is available at th=
e Commercial Service in=
the
U.S. Embassy.
Corporate Taxes &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return
to top
Ecuadorian
and foreign companies with local branches in Ecuador are subject to Ecuador=
ian
income tax.This levy is appl=
ied to
the company's profits (after 15% of profits had been distributed to employe=
es
as required by law).The corp=
orate
income tax rate is 25%, but if profits are reinvested, it is lowered to 15%=
.Dividends remitted abroad after ha=
ving
paid income tax in Ecuador or generated from exempted income are not subjec=
t to
any additional income tax.
Other
remittances sent abroad (i.e. foreign transfers, payments, royalties, etc.)
that constitute income to the beneficiaries are subject to 25% income tax r=
ate
that must be withheld at the source. Exceptions include payments for import=
ed
goods, payment of credits properly registered with the Ecuadorian Central B=
ank,
reimbursement for costs and expenses incurred by the foreign company.<=
/o:p>
Ecuador
has bilateral tax treaties with more than 20 countries including Canada, Br=
azil
and Mexico; however, the U.S. and Ecuador do not have a bilateral tax treat=
y.
U.S.
service companies are subject to 25% income tax withholding on payments
received by Ecuadorian firms. In the absence of a bilateral tax treaty with
Ecuador, in order to comply with Ecuadorian tax law, U.S companies face the
following options:
Issue an invoice fro=
m a
country which has a tax treaty with Ecuador
Issuing two separate
invoices, one covering reimbursement for expenses (non-taxable) and the
other for service fees (taxable)
Invoice to the Ecuad=
orian
company’s affiliate in the U.S. (if there is any)
In
addition to the corporate income tax, the value added tax (IVA) of 12% is
applied to sales transactions, i.e. transfers of ownership and imports.
Web
Resources &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return
to top=
For
additional information, please visit the following websites:
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
The United States continues to be t=
he
preferred destination for Ecuadorian travelers.Estimates show continu=
ous
growth in the number of Ecuadorian travelers to the U.S.In the rank order for all ov=
erseas
arrivals to the U.S., Ecuador is ranked 31st with about 143,000
Ecuadorians visiting the U.S. in 2005 and 145,000 in 2006.The average stay is 8 days, with an
approximate daily expenditure of$200.00.Estimated gro=
wth
rate is 3% for 2007 with estimated 149,000 visitors to the U.S.Travel is one of the leading indus=
tries
in the Ecuadorian e-business market.
Ecuador’s adoption of the U.S=
. dollar
as the official currency led to a pronounced deceleration in inflation, lar=
gely
halting the erosion of Ecuador’s purchasing power.Increased disposable income has fed
increased tourism to the United States.
Travelers
to the U.S. &n=
bsp; 143,000 &=
nbsp; 145,000 &=
nbsp; 149,000
Best Prospects/Services<=
span
style=3D'mso-tab-count:6'> &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Approximately
70% of travelers visit the U.S. for tourism and shopping, 8% for visiting
relatives/friends, 17% for business and the remaining 5% are
students/professionals and training.Florida is the most popular destination for
vacation and tourism travelers.Business travelers tend to travel to Miami, Texas, Los Angeles, and =
New
York.Ecuadorian students and
graduates is an increasing traveling segment, especially for English courses
and/or to obtain undergraduate or post-graduate degrees.
Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; =
Return to top
The U.S.
is Ecuador's main trading partner, producing an outstanding growth potentia=
l in
the business travel market. Proximity to the U.S. and a shared currency
enhances the attraction for professionals to attend courses, seminars, trade
shows and conventions.Studen=
ts
also prefer the U.S. when traveling abroad for their exchange programs.
Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
In Ecuador, there is an active Visi=
t USA
Committee that promotes tourism to the U.S.The Committee organizes an annual =
Visit
Expo USA show sponsored by the U.S. Commercial Service, as well as workshops
and seminars throughout the year.
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
All four
major ports in Ecuador have plans that include concession and modernization
projects. Manta and Esmeraldas have already signed 30-year and 25-year
concession contracts respectively for their ports. However, political
instability in recent years has slowed down and at times stopped the conces=
sion
process for Guayaquil and Puerto Bolivar. Both have plans to resume the
concession process during 2007, after the new government has settled on the=
ir
board of directors. In all four cases there are good opportunities for U.S.
companies selling port equipment.
Port of
Guayaquil concession plans are on hold until the new administration reviews=
and
approves the previous concession process. If the process is approved,
Guayaquil’s Port Authority will sign the concession contract with a
Philippine company, the only one that presented a bid. The contract specifi=
es a
budget of US$115 million in new port equipment and berth modernization.
On
November 17, 2006 the Manta Port Authority signed a 30-year concession with
Hutchinson Port Holdings (HPH) to build and operate a new container termina=
l at
the Port of Manta. The newly created port operating company (owned by HPH a=
nd
the Manta Port Authority, with 95% and 5% of the shares respectively),
Terminales Internacionales de Ecuador (TIDE), will invest US$523 million in
this project.
The Port
of Bolivar did not complete its concession process during the last
administration. All major projects are on stand-by while the new government
sets new parameters for concession and modernization projects. The Bolivar =
Port
Authority expects to continue with the process in 2007.
The
Consorcio Puerto Nuevo Milenio manages the Port of Esmeraldas. This company
signed a concession contract for 25 years with the Port Authority of Esmera=
ldas
in August 2004. Under the contract, the company is required to buy new port
machinery and equipment and construct a new dock during the first 10 years =
of
the concession. For 2007 their budget for this purpose is around USD $12
million.
=
Best Prospects/Services - Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
<=
/p>
Port of
Manta and Port of Esmeraldas are the best prospects for U.S. companies sell=
ing
port equipment or construction companies specialized in port works. Under t=
heir
contracts, both companies managing the ports are required to purchase new
equipment and to engage in new construction projects.
&=
nbsp;
Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Port
Authority of Manta (Autoridad Portuaria de Manta)
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
The
demand for infant care equipment is driven by the need to replace obsolete
equipment and to serve a population growing at a rate of 1.5%. The market has been principally developed by public hospitals t=
hat
provide services to approximately 80 percent of end users.The U.S. is the dominant supplier of i=
nfant
care equipment in Ecuador.The
principal competitors are Germany, UK, Switzerland, Brazil, and Argentina.<=
span
style=3D'mso-spacerun:yes'> Domestic production is limited to =
basic
infant furniture. The market is expected to grow at a 5% rate during 2008.<=
/span>
Data Table (Millions of U.S. dollar=
s):
2005
2006
2007 (estimated)
Total Market Size
6.00
6.30
6.61
Total Local Production
=
.5
=
.5
=
.5
Total Exports
0
0
0
Total Imports
6.00
6.30
6.61
Imports from the U.S.
2.4
2.5
2.6
Figures are unofficial estimates.
Best Prospects/Services=
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Best prospects for infant=
care
equipment include open incubators, phototherapy lamps, infusion pumps, and
ventilators.
Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; =
Return to top
An important niche market is develo=
ping for
infant care supplies including catheters, resuscitators, and monitors.
Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
The
United States is the largest provider of pumps, valves and compressors (PVC=
) to
Ecuador. Statistics up to 2005 reveal that U.S. participation in this market
continues to grow each year, in particular pumps falling into HS code categ=
ory
8413 show a marked upward tendency. Demand for PVC is driven by the oil and=
gas
industries as well as the water sector. Principal competitors are companies=
from
Italy, Brazil and China.Dome=
stic
production of pumps and compressors in Ecuador is non-existent, and domestic
valve production is limited to iron gate valves and bronze seals.
Pumps,
Valves and Compressors (in Thousands of USD)
Best Prospects/Services =
&nb=
sp; =
&nb=
sp; =
Return to top
<=
/p>
The best prospects for PVC
products are centrifugal, turbine and fuel injection pumps, air or vacuum
pumps, air or other gas compressors, refrigerating and air conditioning
compressors, and a range of valves including pressure-reducing, check,
automatic and globe valves.
Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Ecuadorian
importers have a strong perception that US products will satisfy them in pr=
ice,
service, and quality. This is a strong opportunity for U.S. companies.
Franchising
&=
nbsp;
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Franchising
in Ecuador has rapidly expanded since 1994.The country offers new and challen=
ging
markets for U.S. service franchises.Industry sources estimate the market will continue to grow at a rate=
of
8-10% over the next three years.There are no official figures for sales or investments in
franchises.Industry sources
estimate that franchise operations of $800 million in 2005 grew a further 6=
% in
2006, reaching $848 million. There are approximately 150 franchises in Ecua=
dor
of which about 87% are foreign, while 13% are locally developed
franchises.About 50% of fran=
chises
are from the U.S. (especially in the fast food sub-sector), followed by
Colombia (13%), Argentina and Venezuela (8%), Spain and Switzerland (6%), a=
nd
others including Canada, Chile, France, and Italy (9%). <=
/p>
Ecuador’s
adoption of the U.S. dollar as the official currency led to a pronounced
deceleration in inflation, largely halting the erosion of Ecuador’s
purchasing power.Increased i=
ncome
has generated investments in the franchise sector in Ecuador.
Best Prospects/Services=
and
Opportunities =
&nb=
sp; =
Return to top
Best
prospect franchises include services in general such as education and train=
ing,
cleaning services, information technology, retail, gifts, courier services,
apparel, cosmetics, and entertainment.
An
interesting prospect exists in maintenance and repair services, which could
capitalize on Ecuador’s relatively under-developed customer service c=
ulture.Repair franchises that can provide
efficient and reliable services should meet a growing demand in an increasi=
ngly
urban society.
Services
related to businesses, such as packing and delivery services, commercial
cleaning, security systems and services also offer great potential.
The U.S.
is Ecuador's main trading partner, with an excellent growth potential in the
franchise business market. Proximity to the U.S. and a shared currency enha=
nces
the attraction for potential investors to look for U.S. franchises.
Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Overview =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
The
total life insurance market is estimated at USD 46 million, of which USD 8
million is served by offshore companies.&n=
bsp;
Projections estimate life insurance will g=
row by
20 percent annually over the next two years.
The
Superintendency of Banks and Insurance Companies (SBS) currently monitors 40
insurance companies, of which 22 operate in life insurance.
The
five U.S. insurance companies with offices in Ecuador – BMI, Pan-Amer=
ican
Life, Ace, AIG and Amedex – account for 70 percen=
t of
the market.
The
insurance law limits the minimum amount of capital for each type of company,
but it does not restrict the establishment of new insurance companies. Acco=
rding
to Ecuadorian law, insurance companies must be domiciled in the country.
Data
Table (Millions of U.S. dollars):
Market Size:Life Insurance<=
/span>
Millions of USD
2005
2006
2007
Sales by foreign-owned establishments=
26.6
31.92
38.30
Sales by locally owned establishments=
11.4
13.68
16.42
Foreign sales by local establishments=
N/A
N/A
N/A
Total private sales
38.0
45.60
54.72
Sales by establishments located in the U.S=
.
&nbs=
p;
8.0
9.60
11.52
2007 share of sales by foreign-owned
establishments (private sales)
U.S.:
70%
Others:
1.04%
Figures areunoffici=
al
estimates &nbs=
p;
Best Prospects/Services<=
span
style=3D'mso-tab-count:6'> &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
The best prospect in the =
life
insurance sub-sector is individual life insurance.This sector is yet to be developed=
.A major constraint in doing so is =
the 12
percent value added (IVA) tax imposed on life insurance. =
Opportunities &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; =
Return to top
The demand for life insurance will =
grow as
the economy and individual incomes stabilize, and as awareness of the need =
to
be insured grows.If the indu=
stry
succeeds in removing the IVA tax, there will be an added incentive to inves=
t in
life insurance.At the present
time, this impediment has driven demand for off shore insurance.
Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Regulating Agencies:<=
/span>
Superintendency of Banks, National
Insurance Company Administration
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman"'>
2004 (r)
2005 (r)
2006 (e)
D. Total Market Size
470
475
480
E. Total local Producti=
on
10
6
3
F. Total Exports
0
0
0
G. Total Imports
460
461
470
H. Total Imports from U=
.S.
145
139
140
<=
/p>
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman"'>(r)=3D revised
(e)=3D estimated
<=
/p>
Ecuador
is a net importer of wheat. Local production cont=
inues
to decline to a point where it is now almost negligible. Production in 2005
reached 6,000 MT and a projection of 3,000 MT for MY 2006. Wheat imports fo=
r MY
2006 are forecasted at 470,000 MT, a typical growth over the past year given
increased consumption by the feed industry and reduced local production.
Total imports in 2005 reached 461,0=
00 MT,
of which imports from the U.S. accounted for 30 percent approximately. The suspension of USDA´s (Uni=
ted
States Department of Agriculture) GSM-102 Credit Guarantee Program in 1998 =
has
contributed to the reduction in U.S. market share for this commodity in
Ecuador.
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman"'>
NOTE: The above statistic=
s are
unofficial estimates.
(r)=3D revised=
(e)=3D estimated
<=
/p>
Corn consumption depends on local d=
emand
for animal feed, basically by poultry growers. Given the strong annual grow=
th
of the latter (12% per year), demand for feed meal inputs, including corn, has consistently increas=
ed
over the past decade.Local
production is unable to satisfy demand, and as a result Ecuador has become a
corn importer.U.S. market sh=
are
remains strong at 75 to 85 percent, with Argentina the main competitor. Ecu=
ador
also exports corn to Colombia for human consumption.
In 2005
Ecuador imported 415,000 MT of yellow corn, of which 320,000 originated in =
the
USA and the balance came from Argentina. In spite of higher prices relative=
to
Argentine competitors, Ecuador prefers to purchase U.S. corn due to higher
product quality and lower levels of foreign material.
<=
/p>
A. Rank
NA
B. Name of Sector:=
Soybean Meal=
C. PS&D Code
0813100
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman"'>
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman"'>
2004 (r)
2005 (r)
2006 (e)
D. Total Market Size
365
380
385
E. Total local Producti=
on
21
22
15
F. Total Exports
0
0
0
G. Total Imports
330
414
420
H. Total Imports from U=
.S.
20
31
35
<=
/p>
NOTE: The above statistic=
s are
unofficial estimates.
(r)=3D revised=
(e)=3D estimated
<=
/p>
The poultry and shrimp industries consume an average of 92 per=
cent
of feed meal compound produced in Ecuador. This industry grew from 608,000 =
MT
in 1993 to 1,600,000 MT in 2005, driving analogous growth in the demand for
soybean meal.In spite of the
dramatic increase in demand, local soybean meal production has actually
fallen.Current demand for so=
ybean
meal hovers between 370,000 and 380,000 MT per year. Imports of soybean meal
are expected to continue at the level of 400,000 MT to with Argentina and
Uruguay as main suppliers.U.=
S.
market share remains weak. &nbs=
p;
NOTE: The above statistic=
s are
unofficial estimates.
<=
/p>
<=
/p>
(r)=3D revised
(e)=3D estimated
<=
/p>
The Ecuadorian textile in=
dustry
has focused on developing new export markets in recent years.Cotton imports are fairly stable,
averaging 13,000 bales with U.S. producers maintaining almost a 100 percent
share of Ecuador’s cotton imports.&n=
bsp;
Local cotton production has decreased over the last decade, in part =
due
to unfavorable weather conditions and the damage wrought by white fly
disease.Ecuador’s text=
ile
industry has taken advantage of customs preferences under the Andean Trade
Preference and Drug Eradication Act (ATPDEA) by incorporating cotton into q=
uality
textile exports destined for the U.S. market. Most of Ecuador’s cotton-based
textile production first enters Colombia and Peru, where it is fashioned in=
to
garments for subsequent export to the United States. In recent years,
Ecuador’s textile industry has faced strong competition from Asian
textiles.
<=
/p>
A. Rank
NA
B. Name of Sector:=
Consumer-Ready Food Pro=
ducts
C. PS&D Code
NA
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman";mso-bidi-font-family:"Times New Roman"'>=
=
&nb=
sp; =
&nb=
sp;
(Million U.S. Dollars)
2004 (r)
2005 (r)
2006 (e)
D. Total Market Size *<=
o:p>
2,300=
2,350=
2,400=
E. Total local Producti=
on
2,050=
2,065=
2,070=
F. Total Exports
1,300=
1,400=
1,350=
G. Total Imports <=
/o:p>
270
275
280
H. Total Imports from U=
.S.
30
28
29
<=
span
lang=3DEN-US style=3D'font-family:"Arial","sans-serif";mso-fareast-font-fam=
ily:
"Times New Roman";mso-bidi-font-family:"Times New Roman"'>NOTE: The above
statistics are unofficial estimates
* Local production plus import potential.
(r)=3D revised
(e)=3D estimated<=
o:p>
Ecuadorian consumers are extremely receptive to U.S. consumer-=
ready
foods in spite of their relatively high cost.While imports fell during a financ=
ial
crisis five years ago, they have since recovered.Continuing this trend, demand for =
U.S.
origin consumer-ready foods is forecast to grow consistently over the next =
few
years.
<=
/p>
A. Rank
NA
B. Name of Sector:=
Fresh Fruit<=
/span>
C. PS&D Code
NA
=
&nb=
sp; =
&nb=
sp;
(Million U.S. Dollars) =
2004 (r)
2005 (r)
2006 (e)
D. Total Market Size *<=
o:p>
50
51
52
E. Total local Producti=
on
1,450=
1,480=
1,500=
F. Total Exports
1,082=
1,150=
1,200=
G. Total Imports <=
/o:p>
37
40
43
H. Total Imports from U=
.S.
3
3.3
3.5
NOTE: The above statistics are unofficial estimates
* For imported products
(r)=3D revised
(e)=3D estimated<=
o:p>
Ecuadorian families continue to follow the trend towards healt=
hier
food consumption habits.As
dollarization brought price stability to the economy, prices of national
products have also risen, now reaching levels approximating those of import=
ed
products.Increased consumpti=
on of
higher quality imported fruit has principally benefited Chile, with a
commanding 85% market share based on a favorable bilateral agreement with
Ecuador.U.S. participation h=
as
grown recently, reflecting strong consumer acceptance and perceptions that =
U.S.
fruit is of high quality. Fresh fruit is one of the products with the highe=
st
growth potential in Ecuador. <=
/span>
IMPORTS OF AGRICULTURAL GOODS, CALENDAR YEAR 2005
Total Agricultural Imports (US$ million) =
&nb=
sp;
690.0
Ag. Imports from the U.S.(US$ million) =
&nb=
sp;
125.0
U.S. Share of Agricultural Imports (percent) =
18.0
Agricultural Trade Balance with U.S.(US$ million)-1042.0
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Import Tariffs =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
When Ecuador joined the WTO in January=
1996,
it bound most of its tariff rates at 30 percent or less.Ecuador's average applied MFN tari=
ff
rate is 11.12 percent.Ecuador
applies a four-tiered structure with levels of 5 percent for most raw mater=
ials
and capital goods, 10 percent or 15 percent for intermediate goods, and 20
percent for most consumer goods. A
small number of products, including planting seeds, agricultural chemicals =
and
veterinary products are duty-free. For more information visit the Central Bank of Ecuador, the Ecuadorian Customs Authority, and Ecomint.
As a member of the Andean Community of Natio=
ns (CAN),
Ecuador grants and receives exemptions from tariffs (i.e., reduced ad valor=
em
tariffs and no application of the Andean Price Band System) for products fr=
om
the other CAN countries (Bolivia, Colombia, Peru and Venezuela).Currently, these countries have an
Andean Free Trade Zone and apply Common External Tariffs (CET), as stated in
CAN Decision 370.There is a
proposal for a new CET with a three-tiered structure, with levels of 5, 10 =
and
20 percent tariffs.The CAN h=
as not
approved the proposed structure and a final decision is expected to be taken
during 2007.
Ecuador maintains the APBS-Andean Pr=
ice
Band System (SAFP) on 153 agricultural products (13 “marker”
and 140 “linked” products) imported from outside the CAN.The 13 “marker products are =
wheat,
rice, sugar, barley, white and yellow corn, soybean, soybean meal, African =
palm
oil, soy oil, chicken meat, pork meat and powdered milk.Under this system, the ad valorem =
CET is
adjusted (increased or reduced) according to the relationship between
international reference prices, established floor and ceiling prices and the
import price of the commodity. Upon
accession to the WTO, Ecuador bound its ad valorem tariffs (including the
additional levy from the APBS) for these commodities between 31.5 and 85.5
percent.
As part of its WTO accession, Ecuador committed to ph=
ase
out its WTO-authorized price band system, starting in January 1996 with a t=
otal
phase out by December 2001.No
steps have been taken to comply with this commitment.Instead, Ecuador adopted the APBS,=
which
applies the reduced CET to the CAN and increased tariffs to other WTO
members.This decision did not
comply with Ecuador’s commitments to the WTO. However, Ecuador maintains that, as=
the
highest rate under the APBS is beneath the bound tariff rate, Ecuador’=
;s
participation in the APBS is WTO-consistent.
In
addition to duties, all imports are subject to a 12 percent value-added tax,
0.25 per thousand for the Exports and Investment Promotion Corporation (COR=
PEI)
and an additional 0.5 percent tax for the Children’s Development Fund
(FODINFA).Except for the 0.25
percent, which is based on the FOB value, all other charges are based on the
CIF value of the merchandise. Also,
an inspection fee of up to 0.7 percent on the FOB value (with a minimum of =
USD
180) is required for imports over USD 4,000. See Ecomint for details.
Ecuador has failed to eliminate several non-tariff ba=
rriers
since its WTO accession.Impo=
rters
must register with the Central Bank through approved banking institutions to
obtain an import license.In =
order
to get this license, an importer must first obtain, inter alia, a tax
registration number from Ecuador’s Internal Revenue Service (SRI).Ecuador requires prior
authorization from various government agencies, such as the Ministry of
Agriculture (MAG) for imports of most commodities, seeds, animals and
plants.Also the Ministry of =
Health
must grant prior authorization (sanitary registration) for imports of proce=
ssed
foods, food ingredients and beverages, as well as cosmetics and pharmaceuti=
cal
products.Another administrat=
ive hurdle
agricultural importers must overcome is the MAG’s use of
“Consultative Committees” (Committees).The Committees, mainly composed of=
local
producers, often advise the MAG against granting import licenses.These committees often require tha=
t all
local production be purchased at high prices before imports are authorized,
constituting a type of absorption program that is WTO-inconsistent.<=
span
lang=3DEN-US style=3D'mso-bidi-font-family:Arial'>
<=
/p>
Ecuador also continues to maintain a
pre-shipment inspection (PSI) regime for imports with an f.o.b. value of mo=
re than
US$4,000.Pre-shipment inspec=
tion
by an authorized inspection company (both before shipment and after specific
export documentation has been completed at the intended destination) result=
s in
delays far exceeding the time saved in customs clearance.Customs authorities perform random
spot-checks, causing further delays.These practices generally add between six and eight weeks to shipping
times.While this does increa=
se the
landed cost of products, the impact on the volume of U.S. exports is likely=
negligible.
The following imports are exempt from
verification: imports below FOB $4000, arms and defense materials, newspape=
rs
and printed material, traveler’s personal effects, donations to the
public sector, imports by diplomatic missions, imports by the public sector
that are financed by international loans, imports of gas or fuel, equipment
made by the state oil company, imports destined for temporary entry, coffin=
s,
and samples with no commercial value.
Ecuador
maintains bans on the import of used motor vehicles, tires, and clothing. Used special-purpose
vehicles given in donation such as ambulances, mobile clinics, sweepers and
fire trucks are permitted.The
government has temporarily allowed the importation of used vehicles (up to
three years old) for public transportation (i.e. buses and taxis) as well as
refurbished tractors and parts.Large quantities of banned imports are nevertheless widely available.
For details visit the Foreign Trade Coun=
cil
at the Ministry of Foreign Trade or the Ecuadorian Harmonized Code at Ecomint.
Ecuador
applies excise taxes (ICE) levied on distilled spirits (32 percent), beer (=
30.9
percent), soft drinks (10.3 percent), cigarettes (light 98 percent, dark 18=
.54
percent), motor vehicles up to 3 tons (5.15 percent), aircraft, helicopters,
and ships (10.3 percent). As excise taxes on imports are calculated on CIF
value plus import duties, the effective rate is higher for imports than
domestic products. Ecuador has not yet equalized the application of excise
taxes between imported and domestic products.
Imports
of alcoholic beverages, including beer, must be shipped directly from the
country of origin.Documents
required include certificate of origin, sanitary registry, and pre-shipment
inspection.
In December 1999, the MAG, through the=
Ecuadorian Animal and Plant Health
Inspection Service (SESA), issued a requirement that all importers must
present a certificate stating that imported agricultural products (plants,
animals, their products or byproducts) have not been produced using modern
biotechnology.In November 20=
02,
the President issued Executive Decree 3399 creating the National Commission=
for
Biosafety as an office of the Minis=
try of
Environment.It will be
responsible for biotechnology-related products and regulations issues.
In late 2006, Ecuador’s Congress passed a new H=
ealth
Code that bans the import, production, use and trade of genetically modified
(GM) foodstuffs "for human consumption until their safety has been
technically demonstrated to the proper control authority".This new bill keeps conformity wit=
h the
Food and Nutrition Security Law that was passed in April 2006, which calls =
for
exactly the same prohibition. However, this law was temporarily over-ruled =
by
Ecuador's Solicitor General because of inconsistencies in its text.The new Health Code entered into f=
orce
in December 2006, but application rules for the biotech-related provisions =
have
not yet been enacted. The U.S. embassy will work with the proper authoritie=
s to
encourage them to write application rules that are science-based and
WTO-consistent.
Imports
of psychotropic medicines and certain precursor chemicals used in narcotics-
processing require prior authorization from the National Drug Council (CONSEP). Impo=
rts of
weapons, munitions, explosives, armored vehicles, ships, and other related
equipment require prior authorization from the Ministry of Nation=
al Defense.
Under
the Andean Community automotive policy, Ecuador imposes regional content
requirements in the automotive assembly industry ranging from 6 percent to =
14.3
percent in order to qualify for reduced duties on imports. These percentages
will increase yearly through 2009.
Foreign
professionals are subject to national licensing legislation. Foreign insura=
nce
companies may not present offers on government tenders. Maritime transport
services are generally open, subject to reciprocity with other countries. U=
ntil
recently, telephone services were reserved to the state; however, since Jan=
uary
of 2002 telecommunications services have been open to free competition.Nevertheless, provision of
telecommunications services by private companies is virtually absent.<=
/o:p>
Ecuador’s
complicated legal and regulatory regime may impose additional non-tariff
barriers, increasing the difficulty and cost of doing business in the
country.
Import
Requirements and Documentation &=
nbsp; &nbs=
p; &=
nbsp; Return
to top=
Import
License Requirements
Importers
must register with the Central Bank of E=
cuador
to obtain an import license. Import licenses, known as DUI, the Documento U=
nico
de Importacion (Import Document Authorization), are obtained before incoming
goods are shipped from the port of origin.=
According to new regulations, the importer must submit an electronic
form to obtain the DUI license. Hard copy or paper forms are no longer vali=
d;
only the new electronic application is accepted. This form can be found in
Central Bank of Ecuador’s website. Please visit Ecomint for additional details.
The
following documentation is required to obtain an import permit: the commerc=
ial
invoice, original or copy of the bill of lading or airway bill, insurance
policy in accordance with the Insurance Law, the import number assigned by =
the
Central Bank, the importer’s income tax registry number, an inspection
certificate issued in the place of origin, and certificate of origin when
applicable. The license is valid for an unlimited time but it can only be u=
sed
for one shipment.
Upon
arrival of the merchandise, Ecuadorian customs authorizes the payment of du=
ties
and the release of the goods. This
process should take two working days, however, delays have been experienced=
due
to constant political changes within Ecuador’s customs authority.In order to expedite the process, =
the
use of a specialized customs agent is highly recommended, and is a requirem=
ent
for shipments over USD4, 000 in value.
Exports
from Ecuador require an export license (FUE, the Formulario Unico de
Exportacion) issued by the Central Bank through approved banks.The following documentation is req=
uired
to obtain an export license: the export number assigned by the Central Bank,
the exporter’s ID card and income tax registry number, original or co=
py of
the bill of lading or air waybill; commercial invoice and insurance
policy.The issuance of an ex=
port
license takes five working days. To
expedite license issuance, the Central B=
ank of
Ecuador now accepts license requests via Internet.
U.S.
Export Controls &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
U.S.
companies must obtain an export license from the U.S. Government when expor=
ting
defense technology, goods and services to Ecuador, i.e. arms and
ammunitions.For information =
on
export license application procedures, please contact the BXA-Bureau of Export Administration.
Temporary
Entry &n=
bsp; =
; &n=
bsp; =
; &n=
bsp; =
; Return to top
Ecuador
allows temporary entry for up to 15 days of items used for demonstration or
trade fairs, and up to 180 days for duty free zones and special projects.In the case of special projects, t=
he
time period may be extended once for up to six months by presenting an
extension request to the Customs Distric=
t Administrator.
During this period, the obligation to pay taxes and duties is suspended, wi=
th
the condition that the commodities be re-exported. Commodities may also be
nationalized after paying the required taxes and fees.
Although
import duties are waived, a bank guarantee or insurance for 100 to 120 perc=
ent
of the import duties should be presented to Customs.This bond will be returned once the
merchandise is repatriated.An
additional customs control tax must also be paid, based on the CIF value of=
the
merchandise.
For
maquila operations, the equipment needed for assembly operations can also be
imported free of duties, although a bond has to be deposited.No import permits are required.Special labor regulations apply to
companies operating under this system.
Customs
law requires an "in transit" declaration for the transit of forei=
gn
commodities through Ecuadorian territory.&=
nbsp;
This declaration must state the period required for the transit
movement, and that the person signing the declaration and the carrier are
jointly responsible for the payment of duties, taxes, and guarantees on the
commodities shouldthey not a=
rrive
in their entirety at destination.The customs house receiving the incoming merchandise will verify the
contents of this document.
According
to Ecuadorian import regulations, when merchandise is temporarily exported =
for
repair, applicable import duties are only charged on the aggregated value, =
i.e.
new or reconditioned replacement parts, added to the original merchandise.
Merchandise temporarily leaving the country will be marked by customs in or=
der
to identify it upon its return. =
See the Ecuadorian
Customs Authority and Ecomint.
Labeling and Marking Requiremen=
ts &=
nbsp; &nbs=
p; &=
nbsp; Return to top
The Ecuadorian
Standards Institute sets all labeling requirements. Labeling must be do=
ne
in Spanish and should include the name of the company, address and phone
number, tax registration number, country of origin, unit, net weight, and
sanitary registration number if required.
For additional information, please con=
tact
the following government agency:
To determine current regulations, expo=
rters
can also contact their Ecuadorian importers and representatives.=
Prohibited
and Restricted Imports &nb=
sp; =
&nb=
sp; =
Return
to top=
Prohibited
imports include used clothing, used tires, used shoes, used vehicles (with
certain exceptions as previously noted), certain pesticides, certain epoxies
and esters, reptile hides, worked ivory and ivory articles.
Customs
Regulations and Contact Information &n=
bsp; =
; &n=
bsp; Return
to top=
Ecuadorian customs
procedures can be difficult, but in general they are not used to
discriminate against U.S. products.
Because
the U.S. dollar is the legal tender in Ecuador, currency exchange calculati=
ons
are unnecessary. This has simplified international trade procedures, includ=
ing
customs.
=
Overview
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
=
Natio=
nal
standards are set by the Ecuadorian Sta=
ndards
Institute (INEN) of the Ministry of Foreign Trade and generally follow
international practice.SESA (an agency of the Ministry of Agriculture) is responsible=
for
administering Ecuador's sanitary and phytosanitary controls.According to Ecuadorian importers,
bureaucratic procedures required to obtain clearance still appear to
discriminate against foreign products.&nbs=
p;
As a member country of the WTO, Ecuador must comply with the WTO
Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures.<=
span
style=3D'mso-spacerun:yes'> Yet denials of SPS certification o=
ften
appear to lack a scientific basis and to have been used in a discriminatory
fashion to block the import of U.S. products that could compete with Ecuado=
rian
production.This occurs most =
often with
poultry, turkey and pork meats, beef, dairy products and fresh fruit.The ability to import some product=
s,
such as rice, corn, soybeans, and soybean meal depends entirely on the
discretion of the MAG, which will often look to the Consultative Committees=
for
direction.
=
SESA =
follows
the “Andean Sanitary Standards” established under the Andean Communi=
ty of
Nations (CAN).Some stand=
ards
applied to third countries are different from those applied to CAN
members.For example, t=
here
can be differences in the requirements for CAN and third countries for the
importation of live animals, animal products, plants and plant
by-products.SESA also requir=
es
certifications for each product stating that the product complies with risk
analysis and that the country of origin or the area of production is free f=
rom
certain exotic plant or animal diseases.
=
Sanitary registrations are required
for imported as well as domestic processed food, cosmetics, pesticides,
pharmaceuticals, and syringes, as well as some other consumer goods.In a side agreement to its WTO Acc=
ession
Agreement, Ecuador committed to accept the U.S. Certificate of Free Sale
authorized by the U.S. Food and Drug Admini=
stration,
instead of the Government of Ecuador’s Sanitary Registration.In August 2000, the Government of
Ecuador passed a law (Ley de Promocion Social y Participacion Ciudadana,
Segunda Parte – also known as Troley II) followed by application rules
issued in June 2001 to reform the issuance of sanitary permits for food
products.This is a step towa=
rds
modernizing the issuanceof
sanitary registrations with new regulations that should allow the acceptanc=
e of
free sale certificates, require that the government issue sanitary permits
within 30 days of the receipt of the request, and reduce the number of
documents required to obtain a permit.&nbs=
p;
However, these regulations are not
being applied consistently.U=
.S.
firms report that the Izquieta Perez National Hygiene Institute (INHIP - the
agency responsible for registering imported processed food products, cosmet=
ics,
and pharmaceuticals) office in Guayaquil has refused to accept U.S.
Certificates of Free Sale and continues to apply the old regime for sanitary
permits.In addition, non-tra=
nsparent
bureaucratic procedures and inefficiency have delayed issuance beyond 30 da=
ys
and in some cases blocked the entry of some imported products from the Unit=
ed
States.For details, contact =
the Ministry of Public Health and the follo=
wing:
U.S. =
companies
have expressed concerns regarding regulations issued by Ecuador’s Public Health Ministry requiring foreig=
n food
manufacturers to disclose confidential information such as formulas of impo=
rted
food and pharmaceutical products.This requirement appears to go beyond the requirements of the Codex =
Alimentarius
Commission on Internationals Standards and Labeling.
=
Standards
Organizations =
&nb=
sp; =
&nb=
sp; Return to top
&=
nbsp; Conformity
Assessment &nb=
sp; =
&nb=
sp; =
Return to top
INEN-the
Ecuadorian Standards Institute is also in charge of conformity
assessment.Two other organiz=
ations
support this process:MNAC-the
National Quality Council, and OAE-the Ecuadorian Accreditation Organization
under the Ministry of Foreign Affairs=
.
OAE certifies INEN as the accreditation body to evaluate conformity.
The certificate of conformity must =
be
presented in order to obtain an import permit.
&=
nbsp; Product
Certification =
&nb=
sp; =
&nb=
sp; =
Return to top
INEN
requires the following products to have special certification:
-Vehicles
-Textiles
-Refrigerators
-Stoves and ranges
-Tires
-Electric generators
-labels for textiles, apparel, foot=
wear and
accessories
-some construction materials such a=
s Portland
cement, steel bars, tubing
-some automotive components such as
security glass, spark plugs
-automotive brake fluids and lubric=
ants.
Countries (i.e. Venezuela, Colombia=
, Peru,
and Chile) having an agreement with Ecuador are not required to obtain this
special certificate.The U.S.=
does
not have such an agreement with Ecuador.
Accreditation &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
OAE. the Ecuadorian Accreditation
Organization of the Ministry of Industries, is the official accreditation b=
ody
in Ecuador.Laboratory
accreditation is required for the following industries:
-Cosmetics
-White Goods
-Vehicles
-Textiles
-Consumer Goods
-Medicines
-Tires
&nb=
sp;
&=
nbsp; Publication
of Technical Regulations &=
nbsp; &nbs=
p; &=
nbsp; Return to top
INEN-the
Ecuadorian Standards Institute is in charge of informing the public of =
new
and revised technical regulations.These regulations are published in Ecuador’s Official
Gazzette.
&=
nbsp; Labeling
and Marking &n=
bsp; =
; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
INEN-the
Ecuadorian Standards Institute establishes the requirements for labeling
and marking.Labeling must be=
in
Spanish and will include the following information:
Trade Agreements &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Ecuador
is a member of the Andean Community, the ALADI (Latin American Integration
Association) and the WTO (World Trade Organization).In addition, Ecuador has concluded
bilateral free trade agreements with Chile, Venezuela and Colombia as well =
as
with Mercosur (Brazil, Argentina, Paraguay, and Uruguay). Ecuador, in contr=
ast
with its neighbors Colombia and Peru, did not conclude Free Trade negotiati=
ons
with the U.S.
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Openness to Foreign Investment &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Ecuador can be a difficult place in
which to do business. There are restrictions or limitations on private
investment in many sectors that apply equally to domestic and foreign
investors. As a member of the Andean Pact, Andean Decisions 291 and 2=
92
of 1991 nominally govern Ecuador's foreign investment policy.
Implementing regulations issued in January 1993 and a 1997 law to promote
foreign investment sought to liberalize the investment regime. Additi=
onal
legislation to facilitate private sector investment in the telecommunicatio=
ns
and mining sectors was passed in 2000 and has led to increased foreign
investment in the former, though foreign companies have been frustrated by
numerous commercial disputes. A 2006 hydrocarbons law imposed new
conditions in that sector that have been problematic for many companies.
Cumbersome labor laws, which apply equally to domestic and foreign investor=
s,
discourage investment through mergers, acquisitions, or takeovers.
Negotiations for a free trade agreement between the United State and Ecuado=
r,
which would have included investment provisions, have been stalled since Ap=
ril
2006.
Inconsistent enforcement of contracts is one of the main concerns of foreign
investors in Ecuador. Government officials and private Ecuadorian
businesses have used regulatory schemes and questionable legal maneuvers to
hinder foreign company operations in the country.Companies have sometimes been conf=
ronted
with requirements of additional payments not negotiated in original agreeme=
nts;
receiving full and timely payments due can be another recurring problem.
Business disputes with U.S. companies can become politicized, especially in
sensitive areas such as the energy sector.=
In May, 2006 the Ecuadorian government cancelled the petroleum contr=
act
of a major U.S. company after asserting that it violated its contract; the
company disputes the decision – which followed months of public, high=
ly
politicized wrangling – and has filed for international arbitration.<=
span
style=3D'mso-spacerun:yes'>
Under current regulations, foreign investors receive the same rights of ent=
ry
as Ecuadorian private investors. Foreign investment with up to 100%
foreign equity is allowed without prior authorization or screening in most
sectors of the Ecuadorian economy currently open to domestic private
investment. Foreign investors must register their investments with the
Central Bank for statistical purposes. Ecuadorian law requires private
companies to distribute 15% of pre-tax profits to their employees each
year.Many companies, mostly
domestic, use legal loopholes to circumvent this requirement.
Prior authorization is required for license and franchise transactions.&nbs=
p;
No limits exist on the amount of royalties that may be remitted. All
license and franchise agreements must be registered with the Ministry of
Commerce and Industry. In September 1997, the Ecuadorian Congress
repealed the law for the protection of representatives, agents and dealers =
of
foreign enterprises, which had imposed discriminatory restrictions on forei=
gn
companies in their dealings with their Ecuadorian agents. However,
dealers whose relationships predated the repeal may continue to take action
under the law. As a result, several foreign firms continue to be subj=
ect
to lawsuits filed by former representatives.
There is no legal discrimination against foreign investors at the time their
investments are made. Limitations on foreign equity in the financial
sector, prior authorizations for foreign companies investing in public
services, and discriminatory tax treatment for foreign investors no longer
exist. Foreign investors may participate in government-financed resea=
rch
programs.
Although the scope for private sector participation has been expanded in re=
cent
years, foreign investors, and often domestic investors as well, still opera=
te
with limitations in certain sectors of the economy:
Petroleum
All subsurface resources belong to the state. Ecuador permits investm=
ent
by foreign oil companies.For=
eign
oil companies previously engaged in exploration and development activities =
were
under risk-service contracts with Petroecuador. With limited exceptio=
ns,
investments in the oil sector now use production-sharing contracts that give
private investors the right to share in finds. Foreign participation=
is
not permitted in Petroecuador's extensive oil fields.
Ecuador
has been unable to take advantage of historically high oil prices to increa=
se investment
in the petroleum sector, in part because of unfavorable economic terms, leg=
al
uncertainties, GOE tax policies, environmental liability concerns, and a la=
ck
of a coherent energy policy. High profile legal cases brought by and against
foreign oil companies have also dampened foreign investor interest.In 2005, President Palacio issued a
decree requiring that all petroleum exploration and production contracts be
renegotiated.In 2006 the Government of Ecuador made this decree law by amen=
ding
its hydrocarbons law, unilaterally modifying the terms of oil production
sharing contracts.Foreign
investment in petroleum has been moribund for several years, and state-owned
Petroecuador’s production continues to decline.
Private companies, including forei=
gn
ones, can now participate in domestic fuel distribution, refining and trans=
port
activities.However, fuel pri=
ces
are controlled by the central government.&=
nbsp;
Ecuador has insufficient refining capacity to meet domestic demand f=
or
refined products and must import many oil derivatives.
Mining
The mining sector is open to foreign investment, and foreigners have the sa=
me
access to mining concessions as domestic investors. Foreign investors=
are
prohibited from obtaining mining rights in zones adjacent to international
boundaries without the permission of the President and the approval of the
National Security Council of the Armed Forces (COSENA). Legislation a=
nd
regulations were enacted (in 2000 and 2001) to encourage additional investm=
ent
in the sector by eliminating government royalties, reducing the payment of
surface rights per hectare, approving mining titles valid for all mining
processes for 30 years, and streamlining the concession process.However, the validity of mining
concessions under the 2000 law was called into question when the Ministry of
Energy and Mines unexpectedly canceled some concessions in 2003.Investment in mining continues to =
be
modest by Andean standards.Although rising commodity prices have led to an increase in mining i=
nvestment
in Ecuador in recent years, problems with local communities opposed to mini=
ng
operations have caused periodic shutdowns.
Fishing
Foreign investment in domestic fishing operations is restricted to 49% of
equity.Exceptions may =
be
permitted after an appeal to the National Fishery Development Council.The local sea cucumber population =
has
been nearly eliminated, but shrimp, tuna and other fish products are harves=
ted
by national and foreign flag vessels and are major exports for Ecuador.
Electricity
Amendments to the 1996 Electrical Sector Law adopted by the Ecuadorian Cong=
ress
in 1998 authorized greater private participation in the electrical sector, =
but
did not permit private firms to obtain majority control over any distributi=
on,
generation or transmission firms controlled by the state (the vast
majority). Additional reform legislation passed in 2000 authorized
private firms to purchase up to 51% of shares of government owned electric
distribution, transmission, and generation companies.
Several times in recent years, the
Government has backed away from plans to privatize electricity distributors=
hips
due to strong opposition by labor unions and regional and municipal
governments. Three separate efforts to outsource the administration o=
f electricity
distributors while maintaining state control of the assets failed in 2003, =
2004
and 2005.The electric power =
sector
is chronically short of cash due to mismanagement and “black”
losses in transmission and distribution.&n=
bsp;
(“Systemic” losses are due to inefficiencies in the power
distribution grid, while “black” losses are non-technical reven=
ue
shortfalls caused by theft and inefficient metering and billing systems.)
All power distributors are
state-owned; all lose money during at least part of the year, and are there=
fore
unable to make full, consistent payments to power generators.Many are technically bankrupt year=
-round
and depend on central government bailouts.=
The Fondo de Solidaridad owns the stock of the power distribution
companies.As originally
envisioned, the Fondo was established to ensure equitable distribution of
profits in the sector among Ecuadorians.&n=
bsp;
In practice, the Fondo decreases transparency and adds an additional
layer of bureaucracy to the sector.
Electricity generators, including =
U.S.
companies, face chronic problems in collecting accounts receivables from po=
wer
distributors.A subsidy to
inefficient energy electricity producers introduced in 2004 has also had an
adverse impact on more efficient electricity generators, allowing inefficie=
nt
producers to provide a greater share of total electricity.In 2006, Ecuador passed an electri=
city
reform law that attempts to address problems facing the sector by making the
theft of electricity a crime and calling for payment of past debts to
distributors, among other reforms.However, these reforms had not been implemented as of December
2006.
Telecommunications
Basic telecommunications had traditionally been reserved for the state, but=
a
2002 law liberalized the sector. Two private groups with foreign
participation were granted concessions in 1993 to develop cellular telephone
systems. A third, state-owned company was granted a cellular concession in
2003. Satellite and paging services are also in private hands. =
In 1998, Emetel, the former state telephone
monopoly, was split into two corporations (Andinatel in the highlands and
Pacifictel in the coastal region). Pacifictel has faced severe manage=
ment
challenges for the last few years, and continues to struggle to stay
afloat.The company has been =
the
focus of several scandals and has experienced frequent management changes.<=
span
style=3D'mso-spacerun:yes'> Regulatory and transparency proble=
ms
continue to handicap foreign investors.&nb=
sp;
Several have suffered from unilateral severing of their circuit conn=
ections,
and another from regulatory attempts to deny approval to use third-generati=
on
mobile technology, as provided for in its concession agreement.In 2004, BellSouth sold its assets=
in
Ecuador to the Spanish company Telefonica.
Media
Foreign companies are prohibited from owning more that 25% equity in broadc=
ast
stations. Foreigners are not permitted to obtain broadcast concession=
s.
Strategic Sectors
Other "strategic enterprises" are reserved for the state, includi=
ng
national security industries, in which the military often acts as a joint
venture partner with private industry.
Conversion and Transfer Policie=
s &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
In
2000, Ecuador adopted the U.S. dollar as its official currency. Since
Ecuador adopted the dollar, inflation rates have declined from a high of ne=
ar
100% to single digits.The ra=
te of
inflation for 2006 was about 3.2%.
Foreign investors may remit 100% of net profits and capital without
restriction. Investors may also freely repatriate the proceeds from
liquidation of their investments. There are no current limitations on
outflows of funds for debt service, capital gains, returns on intellectual
property, or imported inputs. There is also no significant delay for
remitting investment returns such as dividends, return on capital, interest=
and
principal on private foreign debt, lease payments, royalties and management
fees through normal legal channels.
Ecuadorians may also export capital, and there are substantial Ecuadorian
financial holdings in the United States and other offshore banking centers.=
Expropriation and Compensatio=
n &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Expropriation is provided for in Ec=
uadorian
law with appropriate compensation.In cases of expropriation, the individual has the right to petition a
judge to establish an appropriate price for expropriated holdings.The Agrarian Development Law restr=
icts
the grounds for expropriation of agricultural land and makes land cases sub=
ject
to regular courts.It can be
difficult to enforce property and concession rights, particularly in the
agriculture, mining and petroleum, commercial and residential real estate
sectors.In a number of insta=
nces,
Ecuador’s judicial system has failed to provide adequate protection f=
rom
unlawful expropriations or provide investors and lenders with prompt, adequ=
ate
and effective compensation for expropriated property.
Property, whether land or mobile as=
sets,
that is jointly owned by several persons or companies can be seized by
Ecuadorian courts through judgments or seizure orders.U.S. citizens have had their assets
seized because of judgments against their Ecuadorian partner in cases havin=
g no
connection with the U.S. investor.Resolution and compensation typically require many years and signifi=
cant
legal costs.
Under Ecuador's bilateral investmen=
t treaty
(BIT) with the United States, expropriation can only be carried out for a
public purpose, in a nondiscriminatory manner, and upon payment of prompt,
adequate and effective compensation. In 2004, a U.S. company won a $75 mill=
ion
international arbitration award against the Government of Ecuador.The Government requested a judicial
review of the arbitration award.Upon receiving notice of the award, Ecuador’s Solicitor General
(Procurador General) initiated an investigation of the company.Subsequently, the Government of Ec=
uador
nullified the company’s contract and seized the company’s
considerable investment in Ecuador, asserting that the company had violated=
its
contract.The company has res=
ponded
by initiating international arbitration proceedings.Proceedings are still in the preli=
minary
stages, and Ecuador failed to name its arbiter to the case by the required
deadline.
Dispute Settlement &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Sytemic weakness and susceptibility to political or
economic pressures in the rule of law constitute the most important problem
faced by U.S. companies investing in or trading with Ecuador. Process=
ing
delays, unpredictable judgments in civil and commercial cases, inconsistent
rulings, and limited access to the courts plague the Ecuadorian judicial
system.Criminal complaints a=
nd
arrest warrants against foreign company officials have been used to pressure
companies involved in commercial disputes.=
There have been cases in which foreign company officials have been
prevented by the courts from leaving Ecuador due to pending claims against =
the
company. Ecuadorians involved in business disputes can sometimes arra=
nge
for their opponents, including foreigners, to be jailed pending resolution =
of
the dispute.
The courts are often susceptible to outside pressure and bribes. Cong=
ress
no longer has the power to impeach judges, and the judiciary has not
demonstrated that it effectively investigates and disciplines wayward
judges.
Despite
efforts to depoliticize and modernize the court system, the resource-starved
judiciary continues to operate slowly and inefficiently. There are ov=
er
55,000 laws and regulations in force. Many of these are conflicting,
which contributes to unpredictable and sometimes contradictory judicial
decisions.Enforcement of con=
tract
rights, equal treatment under the law, IPR protection, and unpredictable
regulatory regimes are major concerns for foreign investors.
A number of foreign and local investors have had agricultural land seized by
squatter groups over the years, although the Embassy has not received any
recent complaints about land seized by squatters. In the past, the
agrarian reform authorities often legally recognized squatter claims in the
agricultural sector, with minimal or no compensation paid. Current
agrarian law makes legalization of such seizures difficult and guarantees c=
ash
payment of the market value of the expropriated property. Some local =
and
foreign mining companies have had their concessions occupied by informal
miners, who have subsequently sought a share of the concessions.
Government entities, especially the state oil, telephone, and electricity
companies, have violated their contracts with domestic and foreign private
firms.
The U.S. - Ecuadorian BIT provides for binding international arbitration of
disputes with the Government at the investor's option. Although Ecuad=
or
joined the International Center for the Settlement of Investment Disputes
(ICSID), the Government maintains that congressional ratification is necess=
ary
to make that membership effective.In early 2005, Ecuador modified the Arbitration and Mediation Law to
prohibit international arbitration if the “national interest” c=
ould
be affected.This modification
appears to conflict with the terms of the BIT and, at a minimum, creates
confusion among investors regarding their right to arbitration.
=
=
Performance
Requirements and Incentives &nbs=
p; &=
nbsp; &nbs=
p; Return to top=
There
are no performance requirements associated with foreign investment in
Ecuador. Except for "strategic" sectors described earlier,
foreign investors are not required to have local equity participation.
Visa and residence requirements do not inhibit foreign investment.
Under the Andean Community Common Automotive Policy, Ecuador, Venezuela and
Colombia impose local content requirements on automobiles assembled in coun=
try
in order to qualify for reduced duties on imports. The WTO Agreement on
Trade-Related Investment Measures (TRIMS) prohibits such requirements.
The local content requirement for passenger vehicles was 32 percent in 1997=
. It
was raised to 33 percent for 1998, and was then lowered to 24 percent for 2=
000.
Under the TRIMS Agreement, the three countries were obliged to eliminate lo=
cal
content requirements by 2000. However, in December 1999 the Andean Automoti=
ve
Policy Council determined that it would not eliminate the local content
requirement as it had initially indicated, but instead decided to increase =
it
gradually to 34 percentby the year 2009. This revised automotive
policy may be inconsistent with Ecuador's WTO obligations under the TRIMS
Agreement.
Ecuador is a beneficiary of the Andean Trade Preferences and Drug Eradicati=
on
Act (ATPDEA). The primary goal of this program is to promote export
diversification and to provide sustainable alternatives to drug-crop produc=
tion
in the Andean region. The program that preceded ATPDEA, ATPA, created
Ecuador's cut-flower boom, and also provided for duty-free exports of wood
products, plywood, jewelry, and fruits and vegetables. ATPDEA provides
Ecuador with duty-free access to the U.S. market in a number of new export
categories in which Ecuador is competitive, including textiles, leather
products, and pouched tuna.
The ATPDEA and its trade benefits were due to expire December 31,2006, but
were extended until July 31, 2007.
Right to Private Ownership and
Establishment =
&nb=
sp; Return to top
Foreign and domestic private entities can own b=
usiness
enterprises and engage in almost all forms of business activity. Priv=
ate
entities can compete freely with the public sector in most areas, although =
in
some cases the Government has clearly favored state-owned enterprises in
awarding its business. In theory, foreign and private firms enjoy equ=
al
access in bidding for purchase of state-owned firms or long-term concession
contracts.
Protection of Property Rights &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
There
have been numerous instances where the judicial system has not adequately
protected property owners’ rights.U.S. investors in real estate
should exercise caution when considering a land purchase in Ecuador.
Ecuador's
intellectual property regime is governed by the "Law on Intellectual
Property" adopted in 1998. The law provides criminal and
administrative relief to right holders. Ecuador has ratified the Berne
Convention for the protection of literary and artistic works, the Geneva
Phonogram Convention, and the Patent Cooperation Treaty. Ecuador is a=
lso
bound by the Andean Community Decisions 345, 351, and
486. Decision 486 improves intellectual property
protection by expanding the definition of patent ability and strengthening =
data
exclusivity. In April 2001, the U.S. Trade Representative (USTR) remo=
ved
Ecuador from its Special 301 Watch list to reflect improvements in Ecuador's
intellectual property regime. However, weakened enforcement (particul=
arly
in the area of pharmaceuticals) led to Ecuador's re-listing in 2003. A=
t the
end of 2006, Ecuador was still listed on the Watch list. Ecuador made a pub=
lic
commitment to apply the WTO TRIPS agreement from the date of its accession =
to
the WTO.
In 2004, the Andean Community confirmed the
legality of a Colombian decree reinforcing data exclusivity rules and
intellectual property rights. This
decision removed key conflicts between Andean Community rules and
Ecuador’s WTO commitments, theoretically reinforcing the legal
protections for intellectual property rights.However, Ecuador continues to issue
sanitary registrations to illegal copies of patented products, and at times=
has
relied on test data that the original producing company maintains is protec=
ted
by data confidentiality.
Enforcement against intellectual property infringement remains a serious
problem in Ecuador. The national police and the Customs Corporation of Ecua=
dor
(CAE, by its Spanish initials) are responsible for carrying out IPR enforce=
ment
orders, but it has sometimes been difficult to have court orders enforced.
There is a widespread local trade in pirated audio and video recordings,
computer software and counterfeit activity regarding brand name apparel.&nb=
sp;
On the other hand, local registration of unauthorized copies of well-known
trademarks has been reduced. Some local pharmaceutical companies, who
produce or import copies of patent-protected drugs, have successfully block=
ed
enforcement of parts of Ecuador’s patent laws.
Patents
The IPR law extends patent protection for 20 years from the date of
filing. Patenting of pharmaceutical products is permitted.
Provisions for compulsory licensing are limited. In infringement case=
s,
the burden of proof lies with the alleged infringer. The law also
provides patent protection for new drugs. Although Andean Community
Decision 486, issued in late 2000, represents a significant improvement over
Decision 344, it still does not provide adequate protection for "second
use" patents.
Producers of branded pharmaceuticals are concerned that the "Law on
Generic Drugs", which was passed in 2000, enshrines discrimination aga=
inst
branded pharmaceuticals into law. The law mandates that Government
entities buy only generic drugs. The law also lowers drugstore gross
profit margins on branded medicines to 20%, while maintaining the margins f=
or
generic drugs at 25%. Under the law, drugstores are also required to
devote a certain percentage of shelf space to generic pharmaceuticals.The GOE has proposed to further re=
duce
allowable profit margins on pharmaceutical sales, but no final action has b=
een
taken in that regard.
Copyrights
Printed and recorded works are in theory protected under the IPR law for the
life of the author plus 70 years. Computer programs and software are =
also
protected. However, pirated CDs and DVDs are readily available on many
street corners.Sellers of pi=
rated
goods sell their illegal wares with little fear of prosecution.Ecuador's Education Law appears to=
allow
educational institutions to copy software without regard to such
protections.While the GOE has
denied that the Education law permits such copying, it has done nothing to
clarify the law.
Trademarks
Trademark registration is permitted for renewable 10-year periods, but
registration may be canceled if the mark is not used in the Andean region f=
or a
period of three years. The IPR law provides protections for well-known
trademarks. A trademark registration cannot be cancelled without the
consent of the trademark owner.
Other Protection
The IPR law provides protection for industrial designs and extends protecti=
on
to industrial secrets and geographical indicators. Semiconductor chip
layouts are protected. Plant varieties and other biotechnology produc=
ts
are also, in theory, protected. In 2004, U.S. Customs seized and
destroyed cut-flower exports to the United States by Ecuadorian companies t=
hat
were not paying royalties to holders of plant variety rights.
Registrations and Enforcement
The Ecuadorian Intellectual Property Institute (known by its Spanish acronym
IEPI) was established in January 1999 to handle patent, trademark and copyr=
ight
registrations on the Ecuadorian Government's behalf. IPR enforcement =
has
improved although piracy remains. The Ecuadorian National Police and =
the
CAE are responsible for carrying out IPR enforcement orders, but they often=
do
not recognize the authority of, or enforce IEPI orders. Some foreign
companies have complained that authorities have been increasingly reluctant=
to
issue and carry out IPR enforcement orders. IEPI has reduced its
enforcement efforts due to funding and staffing constraints.
Transparency of Regulatory Syste=
m &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Ecuador's regulatory system is not
transparent. There are no antitrust laws and industry is fairly
concentrated. However, a competition law which many businesses feel is
punitive passed a first round of discussion in Congress in 2006,=
The Superintendent of Banks and Insurance (SBI)
regulates financial and insurance institutions. The SBI does not have=
a
mechanism for public consultation with consumers and the financial industry=
on
proposed changes in policies, norms and regulations.In addition, its relationship with=
the
Central Bank, the Superintendency of Companies and the Deposit Insurance Ag=
ency
(AGD) is not clearly defined in the financial system institutions law (Ley
General de Instituciones del Sistema Financiero).The National Council of Radio
Broadcasting and Television (known by its Spanish acronym CONARTEL) regulat=
es
broadcasters. The Superintendent of Telecommunications regulates fixe=
d-line
and wireless communication services. The Superintendent of Companies
regulates all other firms and, via the National Securities Council, the sto=
ck
markets.
Policies, regulations and standards, particular=
ly
in regards to agricultural trade, often are not based on scientific princip=
les
and discriminate between local and imported products.Political appointees in the Minist=
ries
of Agriculture and Health control imports of agricultural goods, and custom=
s procedures
are cumbersome.Ecuadorian re=
gulators
provide little or no opportunity for public comment on newly proposed laws =
and
regulations, particularly those related to food safety, sanitary and
phytosanitary and other trade-related matters.Ecuador does not comply with the W=
TO
notification requirement.
In addition, ministries, parastatals, and regional and municipal governments
all impose their own requirements and regulations on commercial activity.&n=
bsp;
A 2001 Price Waterhouse Coopers Survey measured the cost of capital due to =
the
lack of clear, accurate, formal and widely accepted practices.Of nine Latin American countries
included in the survey, Ecuador’s legal, regulatory, economic and
accounting practices earned the highest "opacity" (i.e., lack of
transparency) rating. It was estimated that society-imposed costs suc=
h as
over regulation, corruption, nuisance lawsuits, and the unpredictable policy
framework were equivalent to an additional corporate tax of 31%.In the World Economic Forum’=
s 2006
Competitiveness Index, Ecuador ranked 90 out of 125 countries surveyed.
Efficient Capital Markets and Po=
rtfolio
Investment &nb=
sp; =
Return to top
The 1993 Capital Markets Law set up a modern
regulatory structure, opened stock market trading to banks and other firms,=
and
encouraged the development of mutual funds. However, Ecuadorian capit=
al
markets remain underdeveloped. Most large industrial groups are priva=
tely
held, and are financed largely through debt or retained earnings. The
bulk of activity on the country's two small stock exchanges currently invol=
ves
trading in short-term commercial paper, bank obligations, and government
debt. Regional rivalries complicate efforts to develop a truly effici=
ent
capital market in Ecuador's small market.
Most stock trades involve shares in a handful of banks and companies.
Bank credit on market terms is available and improving; rates have been
decreasing. The private sector has access primarily to short-term bank
credit – 68% of the resources are demand deposits. Most of
Ecuador's blue-chip firms maintain external credit lines or other forms of
foreign financing.
The financial system has recovered from the 1999 banking crisis that brought
the government takeover of 15 banks.Following the crisis, the Guarantee Deposit Agency (AGD) was establi=
shed
to liquidate the failed banks, a process that in many cases has not been
completed.The state is saddl=
ed
with several large, moribund institutions with few assets and fewer prospec=
tive
buyers. Private banks’ return on assets (ROA) have continued to recov=
er
since returning to profitability in 2002, and showed an 18% improvement in
November 2006 versus one year earlier.&nbs=
p;
Bank deposits continued to rise by 21% from November 2005 through
November 2006, reflecting continued confidence in the domestic banking
system.Although interest rat=
es are
much lower than during the height of the crisis in 1999 (and trending
downward), many Ecuadorian firms continue to lack sufficient access to medi=
um
and long term credit.A=
law
proposed by a major political party, that has already passed the first hurd=
le
to passage, could jeopardize the financial system’s stability.The proposed law would, among other
things, have the state direct loans to specific industries.The financial sector has been acti=
vely
lobbying against the proposal, but analysts have predicted that the proposed
law could be passed in some form.
Political Violence &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Ecuador does not have a tradition =
of
widespread political violence or guerrilla activity.Crime is a serious concern, especi=
ally
in the larger cities. <=
o:p>
Student, labor union and indigenous protests against government policies ar=
e a
regular feature of political life in Ecuador. While disruptive,
especially to transportation, violence is usually limited and localized.Protesters often block city street=
s and
rural highways, and public transportation tends to be disrupted during these
incidents. Protestors also occasionally burn tires, throw Molotov cocktails,
detonate improvised explosive devices and fire handguns into the air during
demonstrations.Pamphlet bomb=
s are
sometimes used to disseminate political literature.Popular prot=
ests
in 1997, 2000 and 2005 contributed to the removal of three elected presiden=
ts
before the end of their terms. In
general, few protests result in fatalities, but between January 29 and Febr=
uary
7, 2001, as many as nine persons died in clashes around the country between
indigenous-led protesters and security forces.Two persons died (one from a heart
attack and one from a traffic accident) during the series of protests in Ma=
rch
and April 2005 which resulted in the removal of then-President Lucio
Gutierrez.It is against the =
law
for foreigners to engage in political protests.
Kidnappings occur and foreigners have been targeted. The political
violence present in neighboring Colombia can have a spillover effect in
Northern Ecuador.Since 1998,=
at
least 10 U.S. citizens have been kidnapped near Ecuador’s border with
Colombia.The U.S. Embassy in=
Quito
advises against travel to the northern border of Ecuador – to include=
the
provinces of Sucumbios, Orellana and Carchi and northern Esmeraldas
Province.However, kidnapping=
s are
more often economically than politically motivated. In October 2000,
kidnappers seized several foreign oil workers in Eastern Ecuador. Aft=
er
murdering one of their American hostages, they released the other victims u=
pon
receipt of a ransom payment. Dozens of individuals associated with the
kidnapping were arrested in Colombia in June 2001. A British oil work=
er
was kidnapped and murdered in 2002.
Ecuador's oil export pipeline was subjected to repeated terrorist attacks in
2000, though no such attacks were registered over the last six years. =
In
August 2005, communities in the oil producing region east of the Andean
mountains (in the sparsely populated Amazon region of Ecuador known as the
"Oriente") seized the government owned oil pipeline, the SOTE, to
force central government investment and social spending in the area.Oil exports were temporarily inter=
rupted
and two oil spills occurred.=
The
GOE brought in the military to restore order.Other communities across the natio=
n have
also successfully used protests and strikes to obtain promises of increased
government spending on social benefits and infrastructure.Some indigenous communities oppose=
d to
development have protested to block access by petroleum and mining companie=
s
Businesses continue to report being extorted for
protection money. Security on the northern border with Colombia, where
the majority of Ecuador's oil deposits are located, is particularly
tenuous. The area is used as a transshipment point for precursor
chemicals used in illegal drug protection as well as arms and supplies for
Colombian insurgent groups and narco-traffickers.
Corruption =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Return to top
Corruption is a serious problem in Ecuador.&nbs=
p;
Transparency International consistently ranks Ecuador near the bottom among
countries it surveys in the region. Ecuador ranked 138 out of 163 countries
surveyed for Transparency International's Corruption Perceptions Index 2006
(dropping significantly from the previous year) and received a score of 2.3=
out
of 10 (10-highly clean, 0-highly corrupt). =
In the
Western Hemisphere, only Venezuela and Haiti received lower scores than
Ecuador.
Ecuador has laws and regulations to combat official corruption, but they are
inadequately enforced. Illicit payments for official favors and theft=
of
public funds takes place frequently. Dispute settlement procedures are
complicated by the lack of transparency and inefficiency in the judicial
system.In many polls, only t=
he
Congress is rated worse in trustworthiness. Local authorities often
demand "gratuities" to issue necessary permits.
Offering or accepting bribes is illegal and punishable by imprisonment for =
up
to five years. Bribes to a foreign official cannot be deducted from
Ecuadorian taxes. The Controller General of the Nation is responsible=
for
the oversight of public funds and there are frequent investigations and
occasional prosecutions for irregularities. These investigations can =
be
politically motivated.Autono=
mous
agencies are subject to little effective oversight. Government offici=
als
and candidates for office often make an issue of corruption, but there is
little follow through. Politically motivated corruption scandals are a
feature of Ecuadorian political life. High-profile cases have rarely =
led
to convictions.
Ecuador is not a signatory to the OECD Convention on Combating Bribery, nor=
has
Ecuador complied with the main requirements of the OAS Inter-American
Convention Against Corruption.
Bilateral Investment Agreements=
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
The U.S. - Ecuadorian Bilateral Investment Trea=
ty
provides for national treatment, unrestricted
remittances and transfers, prompt, adequate and effective compensation for
expropriation, and binding international arbitration of disputes.However, in early 2005, Ecuador mo=
dified
the Arbitration and Mediation Law in an attempt to prohibit international
arbitration if the “national interest” could be affected.This modific=
ation
appears to conflict with the terms of the U.S.-Ecuadorian Bilateral Investm=
ent
Treaty, and, at a minimum, creates confusion among investors regarding their
right to arbitration.
OPIC and Other Investment Insura=
nce
Programs =
; &n=
bsp; Return to top
Ecuador has had an Investment Guarantee Agreeme=
nt
with the Overseas Private Investment Corporation (OPIC) since 1986.
Ecuador has signed and ratified the Multilateral Investment Guarantee Agree=
ment
(MIGA).
Labor &n=
bsp; =
; &n=
bsp; =
; &n=
bsp; =
; &n=
bsp; Return to top
Ecuador's population is estimated =
at
13.5 million in 2006, according to census data. Semiskilled workers a=
re
relatively abundant at low wages, although widespread emigration over the p=
ast
few years has led to shortages of skilled workers in some parts of the
country. Minimum compensation levels are set by the Ministry of Labor
according to the job and industry and can be adjusted by Congress. The
minimum compensation package was about $135 per month at the end of 2004,
rising to about $150 per month in 2005. In 2006, the average minimum
monthly wage package rose $10 to $160. According to official figures, the
unemployment rate in the three largest cities fell from 9.25% in 2004 to 8.=
95%
in 2005.In 2006, EcuadorR=
17;s
Central Bank estimated the unemployment rate at 9.98%. However, the national
underemployment rate is estimated at over 50%.
Ecuador's economic woes have
contributed to high levels of emigration in recent years. An estimated
1,000,000 people, or 17.2% of Ecuador’s labor force, emigrated between
1999 and 2005, principally to Spain and the U.S.
The public education system is
tuition-free, and attendance is mandatory from ages 6 to 15. In practice,
however, schools often require parents to pay for education-related expenses
such as to cover children’s books, school’s utility bills, and
transportation costs.Many ch=
ildren
drop out before age 15, and in rural areas only about one-third complete si=
xth
grade. The government is striving to create better programs for the rural a=
nd
urban poor, especially in technical and occupational training. However,
government funding for such training has not kept up with demand.In recent years, it also has been
successful in reducing illiteracy. Enrollment in primary schools has been
increasing at an annual rate of 4.4% -- faster than the population growth
rate.According to the 1979
constitution, the central government must allocate at least 30% of its reve=
nue
to education; in practice, however, it allots a much smaller percentage. Pu=
blic
universities have an open admissions policy.=
In
recent years, however, large increases in the student population, budget
difficulties, and politicization of parts of the university system have led=
to
a decline in academic standards.
A
weak public university system produces a surplus of semi-qualified graduate=
s in
the professions. Trained financial professionals and engineers can be
difficult to attract and many graduates require additional training to reach
international standards. There are relatively few R&D and high
technology investments in Ecuador, limited mostly to agricultural research,
with a small amount of government activity as well as that of some foreign
firms. Little post-graduate education exists in Ecuador, and scientis=
ts
and medical professionals are nearly all foreign-trained. At this poi=
nt,
none of the Ecuadorian universities offer doctorate programs beyond some
limited offerings in some social sciences at two institutions.Masters-level degrees are widely
offered, but relatively few are of international competitive levels of
quality.Upper-level Ecuadori=
an
business managers have frequently been educated abroad, most often in the
United States.
Cumbersome
labor regulations apply equally to both foreign and domestic firms and tend=
to
inhibit investment and foster evasion. Legal changes to modernize the
country's Labor Code were passed by Congress in 2000 as part of omnibus
economic reform legislation. However, the Constitutional Tribunal
declared virtually all of the changes unconstitutional. In 2006, the
Labor Ministry worked with an ILO representative to draft a revised Labor C=
ode
to better comply with ILO standards.The revised draft labor code is currently being reviewed by labor and
business sectors before being sent to Congress.
The
Labor Code provides for a 40-hour work week, 15 calendar days of annual paid
vacation, restrictions and sanctions for those who employ child labor, gene=
ral
protection of worker health and safety, minimum wages and bonuses, maternity
leave, and employer-provided benefits. By law, companies must distrib=
ute
15% of pre-tax profits to their employees. Many employers rely on
short-term outsourcing contracts since job tenure rules make it difficult to
lay off permanent workers.
Most workers in the private and parastatal sectors have the constitutional
right to form trade unions and local law allows for unionization of any com=
pany
with more than 30 employees. Less than 10% of the urban work force,
mostly skilled workers in medium- to large-sized enterprises or state
industries, is officially organized. Private employers are required to
engage in collective bargaining with recognized unions. The Labor Code
provides for resolution of conflicts through a tripartite arbitration and
conciliation board process. The Code also prohibits discrimination
against union members and requires that employers provide space for union
activities.
The
International Labor Organization and prominent NGOs believe international l=
abor
standards are not respected in Ecuador.&nb=
sp;
Workers fired for organizing a labor union are entitled to financial
indemnization, but the law does not mandate reinstatement.
Except
for public servants and workers in some parastatals, workers by law have the
right to strike. Legally striking employees are entitled to full pay =
and
benefits and may occupy the premises under police protection, although there
are restrictions on solidarity strikes. Most public sector employees =
are
technically prevented from joining unions, but most are members of a labor
organization and most labor actions are in fact illegal strikes by public
employees. Although trade union political influence has declined in r=
ecent
years, the Unified Workers Front (FUT), the teachers’ union (UNE), and
other labor groups occasionally attempt to stage national strikes to protest
the modernization process and economic reform measures. From January
through November 2006, the number of strikes and local conflicts decreased
approximately 36% from those in the same period in 2005, according to natio=
nal
police records.
With assistance from the ILO, Ecua=
dor
has been taking steps to eliminate child labor, which is still common in ma=
ny
industries.
In 2006, Ecuador hired 29 full-time
child labor inspectors and six support staff tasked with conducting unannou=
nced
inspections.Through Septembe=
r,
inspections at 595 companies found 88 child workers in 56 companies, result=
ing
in $34,000 in fines.Inspecto=
rs
have been allocated a budget of $300,000, but lack independent means of
transportation to conduct inspections.&nbs=
p;
Economic
realities leave families more than ready to send their boys, and sometimes
girls, out to work, even if it means pulling them out of school and placing
them in fields, mines or factories where they are exposed to hazardous
conditions for little or no pay.The International Labor Organization estimated that 69,000 children =
ages
10 to 14, and an additional 325,000 young people ages 15 to 19, were workin=
g in
agriculture in 1999, the year of Ecuador's most serious economic crisis in
recent decades.Anecdotal evi=
dence
indicates that these figures have dropped since 1999, aided substantially by
the economic recovery and more recently by the hiring of additional child l=
abor
inspectors in 2006.How=
ever,
labor advocates in Ecuador assert that only a significant increase in wages
will keep families from sending their children to work in the fields.The ILO's most recent child labor =
data dates
from 2001.An ILO census to
determine the number of children currently involved in child labor will be
conducted starting in December 2006.
Foreign-Trade Zones/Free Ports=
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
A free trade zone law was passed in 1991 =
in
order to promote exports, foreign investment and employment. The law
provides for the import of raw materials and machinery free of duty and tax;
the export of finished and semi-processed goods free of duty and tax; and t=
ax
exemptions for business activities in the government-established zones.&nbs=
p;
Foreign investments in free trade zones are exempt from future restrictions=
on
capital repatriation. Free trade zones may be used for industrial or
commercial activities. Companies establishing operations in free trade
zones are required to pay a fee equal to 2% of their investment to the Nati=
onal
Council of Free Trade Zones.However, Ecuador’s tax authority frequently does not respect t=
he
tax benefits conferred by the free trade zone law.As a consequence, free trade zones=
are
few and largely unimportant to the economy.Free trade zones have been establi=
shed
in Esmeraldas, Manabi and Pichincha provinces, and a zone is planned for the
site of the new Quito airport.
A maquila (in-bond processing) law has been in effect since 1990. The
majority of maquila operations in Ecuador are in the textile and
fish-processing sectors.
Foreign Direct Investment Statistics<=
span
style=3D'mso-tab-count:4'> &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Foreign investment in Ecuador remains concentrated in=
the
oil sector. The construction of the Trans-Andean Heavy Oil Pipeline
(OCP), completed in October 2003, accounted for much of this investment.&nb=
sp;
This massive construction project carried out by a consortium of five forei=
gn
oil producers resulted in inward investment of $3.5 billion, including dire=
ct
project investment of $1.4 billion. Subsequent investment in oil
production to fill the OCP has not materialized due to lack of a GOE oil se=
ctor
development policy, the contract nullification and seizure of assets belong=
ing
to a major U.S. oil company, and Ecuador’s demand that all oil contra=
cts
be renegotiated.Foreign dire=
ct
investment (FDI) outside the oil sector remains modest and is focused on
financial services, food processing, the chemical and pharmaceutical
industries, and machinery and vehicle manufacturing. Overall FDI infl=
ows
totaled approximately $1.6 billion (4.5% of GDP) in 2005. The Un=
ited
States is the major source of foreign investment capital. The petrole=
um
sector accounts for the lion's share of this inflow, but there are signific=
ant
U.S. investments throughout the Ecuadorian economy. Registered invest=
ment
from "off-shore" locations, such as Panama, the Bahamas, and the
U.S., includes movements of Ecuadorian-owned capital that would not normall=
y be
considered as FDI. Ecuador needs to attract more FDI to promote econo=
mic
growth and offset the balance of payment impact of debt service payments.
The largest foreign investors in
Ecuador are petroleum companies engaged in exploration and production,
including City Oriente, Burlington Resources (Conoco Phillips), and gas com=
pany
Noble Energy (all U.S. firms), Andes Petroleum and CNPC International
(Chinese), YPF/Repsol (Spain), AGIP (Italy), and Perenco (France). The
largest U.S. investor in Ecuador had its assets seized by the Ecuadorian
government for alleged contract violations and is no longer operating in the
country.U.S. oil servi=
ce
companies Baker Hughes and General Pipe Services are also present.U.S. Duke Energy is active in the
electrical sector.
Exxon
Mobil distributes fuels at service stations across the country. U.S. citizens have also invested i=
n the
textile and agricultural sectors (flowers, fruit and vegetables).
American firms active in the manufacturing sector include: General Motors,
which holds an interest in two automotive assembly plants, Owens-Illinois
(glass containers), Philip Morris (cigarettes), Bristol-Myers Squibb
(medications), and Fuller (paints). Among third country investors,
General Tire (U.S./Germany) manufactures tires, Holderbank (Switzerland)
produces cement, Akzo (Netherlands) makes fibers and textiles, Borden
(Netherlands) manufactures chemicals, and Eternit (Switzerland) fabricates
construction materials.
There are several American pharmaceutical companies operating in Ecuador,
including: Schering Plough, Bristol-Myers Squibb, Merck Sharp & Dohme,
Wyeth Consumer Healthcare, Abbot, Janssen Pharmaceutical, and Pfizer.
Baxter has seven renal units in the country.In 2004, Bellsouth sold a ma=
jor
investment in cellular services to Telefonica, S.A. (Spain). U.S. fir=
ms
Colgate-Palmolive and Kimberly Clark manufacture toiletries and cleaning
products. British SAB Miller owns the major brewery. Nestle
(Switzerland) and Kraft (U.S.) are leading food product manufacturers, whil=
e a
number of other foreign firms have invested in processing facilities for
non-traditional vegetables and fruits. Continental Flour (U.S.) and
Seaboard mill flour. Continental, along with several other U.S. firms=
, is
a major investor in shrimp farming. Standard Fruit/Dole (U.S.),
Chiquita Banana, and Del Monte are involved in banana marketing. Exxon Mobil (U.S.) and Shell
(Holland/U.K.) have invested in wholesale gasoline distribution, while Chev=
ron
sold its distribution business in 2006. Several U.S. franchise chains=
are
now operating in Ecuador, including Tricon (Pizza Hut/Kentucky Fried
Chicken/Taco Bell), Burger King, McDonalds, Tony Romas, TGI Friday, Applebe=
e's,
Papa John’s, Chilli’s, Romano Maccaroni, Domino's Pizza, and New
Horizons. Citibank (U.S.) and Lloyd's (U.K.), have commercial banking
operations in Ecuador. U.S. airlines Delta, Continental, and American=
, as
well as hardware (IBM, Xerox), software (Microsoft, Oracle) and advertising
(McCann Ericson) companies are also active.
Investment
Statistics Table (million of $)1
2001
2002
2003
2004
2005
Inflow of FDI
1339.0
1275.3
1554.7
1160.3
1646.1
FDI Inflow/GDP(%)
6.4%
5.1%
5.4%
3.6%
4.5%
FDI (by Country of origin):
2005 (1st+2nd
quarter)
U.S.
317.00
392.00
204.33
309.71
178.89
Cayman Islands
67.40
8.50
457.44
39.32
8.44
Canada
430.00
352.00
328.34
303.27
327.2
Spain
85.00
87.00
48.85
48.91
80.84
Europe
235.20
269.30
222.23
171.94
171.19
Brazil
**
1.43
34.30
29,76
62.67
By Sector Destination:
2005 (1st+2nd
quarter)
Oil/Mining
1120.00
1062.60
828.05
903.08
871.31
Construction
55.30
5.60
441.68
30.95
111
Manufacturing
59.10
56.50
70.99
36.89
28.72
Commerce
54.00
45.40
50.38
49.71
28.88
Services provided to firms
11.70
63.00
89.24
39.69
3.21
Others
38.90
41.90
48.39
41.24
24.36
&=
nbsp;
Notes:=
1: All figures are listed in millions of dol=
lars
unless otherwise noted. Data is from the Central Bank of Ecuador.&nbs=
p;
2: FDI from Cay=
man
Islands includes investment from other countries through Cayman Islands.
Source: Central Bank of Ecuador
Web Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return to top
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se endeavors.
How Do I Get Paid (Methods of Payme=
nt) &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Ecuador has adopted the United =
States
dollar as the country’s official currency.The prin=
cipal
difficulty faced by foreign firms in the Ecuadorian marketplace is weak rul=
e of
law.Ecuador, like many third=
world
economies, does not have a reputation of complying with contractual
commitments, a judicial system independent of external influence, a stable =
and
predictable regulatory environment, or a stellar record of paying on time a=
nd
in the amounts previously agreed.
Traditionally, virtually all pr=
ivate
sector imports into Ecuador were financed with confirmed letters of
credit.About half were sight
letters of credit, with the other fifty percent 90-day sight L/Cs.Unfortunately, letters of credit a=
re
today very difficult to obtain.Most banks abroad will not accept Letters of Credit connected to
Ecuadorian banks.Credit card
orders are popular among small importers, and cash transactions have become
increasingly common.
Financing is a key ingredient in
selling to both the government and the private sector.Local banks offer financing in U.S.
dollars, but interest rates are in the 14percent range –
substantially higher than those in the United States – with terms that
rarely extend for more than 90 days.As a result, U. S. exporters with the capacity to provide direct cre=
dit
facilities will have a significant competitive advantage.However, U.S. companies would be w=
ell
advised to exercise judgment before extending credit to Ecuadorian
companies.=
To the extent practical, U.S. companies are encouraged to base
contracts on U.S. law, to allow counter-parties to act as importer of recor=
d by
selling on U.S. territory, to structure transactions to minimize the risk of
non-payment, and to exercise judgment in extending credit.In an increasing number of instanc=
es,
foreign companies are successfully configuring transactions to reduce legal=
and
payment risk, to the extent of routing routine payments through escrow acco=
unts
based in the U.S.
When negotiating an agent or
distributor agreement with an Ecuadorian counter-party, there are many
dimensions to agree.The Comm=
ercial
Service strongly recommends that U.S. firms consider conceding some ground =
on
quantities, delivery timing, price, shared marketing expense or training, a=
nd
holding the line firmly on which law governs contracts, the selection of
financial intermediaries, and credit.
As is true in many countries around the world, the interest of
officials responsible for government procurement contracts may not center on
the requirements established by law.The Commercial Section of the U.S. Embassy encourages U.S. companies
interested in government contracts, or in business activities requiring
government licensing or approvals, to consult with us early in the process.=
Two international banks –
Citibank and Lloyds TSB – maintain operations in Ecuador, serving as
reliable financial intermediaries for those clients averse to risk within t=
he
financial system.
How Does the Banking System Oper=
ate &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Liberalization of =
the
Ecuadorian economy in the early 1990’s stimulated its financial secto=
r to
expand rapidly in the first half of the decade.By the end of the 1990s, however,
Ecuador was experiencing a deep economic contraction, with GDP per capita
dropping to levels not seen since the 1960s.The banking sector suffered a liqu=
idity
crisis, forcing the government to assume control of twenty defaulting
commercial banks.As a conseq=
uence,
Ecuador’s government today controls about 60% of the market via two of
the three largest banks in operation: Banco Pacifico, which merged with sta=
te
owned Banco Continental, and Filanbanco, which merged with Banco La
Previsora.Despite the
government’s intervention, in 2000 Filanbanco collapsed and a new
schedule for repaying depositors was established.
Many owners of collapsed banks =
fled
Ecuador with bank deposits.I=
ndustry
sources estimate that as much as USD 2 billion (42% of pre-crisis deposits =
in
the banking system) was lost to devaluation and capital flight.In March of 1999, the government of
Ecuador froze monetary deposits in the system, subsequently issuing bonds to
cover the breach between assets and liabilities on failed banks’ bala=
nce
sheets.In 2001, the remaining
private Ecuadorian banks were persuaded to take these low quality bonds onto
their balance sheets.Foreign
banks, including Citibank and Lloyds TSB, were not required to assume these
obligations.
In the course of the banking co=
llapse
in the late 1990s trade credits in the banking system were not honored,
resulting either in non-payment or delayed payment at deep discounts.Many U.S. banks and exporters reco=
vered
cents on the dollar.The
Export-Import Bank of the United States is owed tens of millions of dollars,
and remains closed for exports to Ecuador until it is repaid.
Private Banks, financial compan=
ies,
and insurance firms are regulated by the Superintendency
of Banks. In December of =
1998,
the Deposits Insurance Agency (AGD) =
was
formed to cope with the growing number of bank failures and liquidity probl=
ems,
and to implement comprehensive banking reforms and controls.In 1999, Ecuador authorized the AG=
D to
restructure the banking sector based on the results of an international aud=
it.
The AGD is the only deposit insurance scheme in place, with small depositors
becoming senior creditors in the event of liquidation.
The Financial Institutions law esta=
blishes
fully consolidated disclosure requirements. The Central Bank reserve
requirement has been set at nine percent of technical equity (weighted asse=
ts
plus contingencies). All banks are required to have a capital stock (techni=
cal
equity) of at least USD 7.5 million. In case of solvency problems and
non-compliance with the law, the Superintendency of Banks puts the financial
institution in a rehabilitation program until it performs as required. If n=
ot,
the AGD takes ownership and through a new administration tries to reactivate
the bank. If this fails, the Superintendency of Banks liquidates the assets=
of
all failed institutions.
&=
nbsp;
Foreign-Exchange Controls &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Ecuador has adopted the United =
States
dollar as the country’s official currency.The dollar replaced the sucre bill=
s in
circulation by early 2001. As of June 13, 2000, all savings and checking
accounts were officially converted to US dollars.
U.S. Banks and Local Correspond=
ent
Banks &=
nbsp; &nbs=
p; Return to top
Cit=
ibank and
Lloyds TSB Bank operate branch offices in Ecuador, where they benefit from
client perceptions that they offer greater security and reliability.Most Ecuadorian banks maintain
correspondent relationships with U.S. banks.Among the major Ecuadorian banks
engaging in international business are Produbanco, Banco del Pichincha, Ban=
co
del Pacifico, and Banco de Guayaquil.Several Ecuadorian banks, including Pacifico and Pichincha, have
subsidiaries or agencies in the U.S.For a complete list of banks in Ecuador, please contact the Ecuadorian Association of Private Banks.<=
/p>
Project Financing =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; &=
nbsp; Return to top
The Overseas Private Investment Corporation (=
OPIC)
offers investment risk insurance and limited financing for projects with at
least 25 percent U.S. equity. OPIC
financing is available for small and large projects through both direct loa=
ns
and loan guarantees.Lo=
ans
generally range in amount from USD 2 million to 10 million.Loan guarantees, which are typical=
ly
used for larger projects, range in size from USD 10 million to 75 million, =
but
in certain instances can be as high as USD 200 million.
The Trade
and Development Agency (TDA) provides grants to both private and public
sector entities supporting contracts with U.S. firms to conduct studies that
determine the technical, economic, and financial feasibility of proposed ma=
jor
projects.<=
/p>
The U.S.
Export-Import Bank offers loan guarantees and export credit insurance f=
or
U.S. exports.At present, cov=
erage
for Ecuador is not available.
The Andean
Development Corporation (CAF) is actively involved in financing
infrastructure development projects in Ecuador.CAF is presently supporting Peruvi=
an and
Ecuadorian projects in the Binational Development Plan for the Border Region
which forms part of the peace agreement signed between Ecuador and Peru in
October of 1998.
The only project finance concluded =
in
Ecuador in the last five years has been for the construction of the OCP-the
second oil pipeline in the country.Another ongoing project, with limited recourse financing, is for the
construction of the Quito International Airport.
Web Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return to top
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Busin=
ess
Customs =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return to top
Business customs in Ecuador are sim=
ilar to
those in other Latin American countries.&n=
bsp;
Ecuadorians are formal in their business relations, with suits and t=
ies
the norm in the highlands and more casual attire common on the coast.Business meetings are conducted in
offices or restaurants, the latter often used in order to become better
acquainted with a potential business partner.While meetings normally start some=
what
after the appointed time, Americans are expected to be punctual. Whatever t=
he venue
of a business meeting, small talk usually precedes business discussions.
With regard to social courtesies,
Ecuadorians are relatively polite and well mannered.Superiors are treated in a friendl=
y but
respectful way, and the use of a title (such as doctor, economist or engine=
er)
before the name is common.Bu=
siness
is conducted in Spanish, and efforts by Americans to speak Spanish are
appreciated.Interpreters are
available for Americans who do not speak Spanish.When invited to an Ecuadorian home=
, a
gift such as flowers is appreciated.
Travel Advisory &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
The
U.S. Embassy in Quito advises against travel to the northern border of Ecua=
dor,
including the provinces of Sucumbios, Orellana, Carchi and northern
Esmeraldas.. U.S. Government personnel are restricted from travel to these
areas due to the spread of organized crime, drug trafficking, small arms
trafficking, and incursions by designated Colombian terrorist organizations.
Since 1998, at least ten U.S. citizens have been kidnapped near Ecuador's b=
order
with Colombia. One U.S. citizen was murdered in January 2001 by kidnappers
holding him for ransom.
Political
demonstrations occur frequently throughout Ecuador, including the Galapagos
Islands. Protesters often block city streets and rural highways, including
major arteries such as the Pan-American Highway. Public transportation is o=
ften
disrupted during these events. Protestors may burn tires, throw rocks and
Molotov cocktails, engage in destruction of property and detonate small,
improvised explosive devices during demonstrations, including pamphlet bomb=
s.
Police response often includes the use of water cannons and tear gas. United
States citizens and U.S. affiliated interests are not usually targeted, but
U.S. citizens are advised to avoid areas where demonstrations are in
progress.Please see the foll=
owing
links for local information in Quito and Guayaquil’s consular distric=
ts,
respectively:
U.S.
citizens may also keep informed of daily happenings by following the local
news. As there are no English language news outlets in Ecuador,
English-speaking hotel personnel and tour guides are an important source of
information.
Ecuadorian
authorities may declare states of emergency in provinces and regions affect=
ed
by civil unrest, natural disasters or other disruptions.During states of emergency, the mi=
litary
is allowed to perform joint patrols with the police, some constitutional ri=
ghts
may be suspended and curfews may be imposed. The police and military may be=
granted
expanded search authority under a state of emergency, and roadblocks may be=
set
up to check personal identification and vehicle registration. U.S. citizens
should carry identification at all times, including proof of U.S. citizensh=
ip,
and abide by any restrictions imposed during a state of emergency or risk
arrest. Travelers should follow the local news or consult with the U.S. Emb=
assy
in Quito or the U.S. Consulate General in Guayaquil for specific informatio=
n.
Travelers to Ecuador's beach areas =
should
be aware that strong currents, undertow, and underwater hazards are common =
and
not posted. Lifeguard stations, where they exist, are often unmanned.
Up-to-date
information on safety and security can also be obtained by calling
1-888-407-4747 toll free in the U.S. For callers outside the U.S. and Canad=
a, a
regular toll-line can be called at 1-202-501-4444. These numbers are availa=
ble
from 8:00 a.m. to 9:00 p.m. eastern time, Monday through Friday (except U.S.
federal holidays).
The Department of State urges Ameri=
can
citizens to take responsibility for their own personal safety while travel
overseas.
Visa Requirements &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
A
valid U.S. passport is required to enter and depart Ecuador. Tourists must =
also
provide evidence of return or onward travel. U.S. citizens do not need a vi=
sa
for a stay of 90 days or less. Those planning a longer visit must obtain a =
visa
in advance. U.S. citizens whose passports are lost or stolen in Ecuador must
obtain a new passport at the U.S. Embassy in Quito or the U.S. Consulate
General in Guayaquil and present it, together with a police report of the l=
oss
or theft, to the main immigration offices in those cities to obtain permiss=
ion
to depart. An exit tax must be paid at the airport when departing Ecuador,
currently that tax is $37.93 but will increase in August 2008. For further
information regarding entry, exit, and customs requirements, travelers shou=
ld
contact the
Ecuadorian Embassy at 2535 15th Street, NW, Washington, DC 20009; telep=
hone
(202) 234-7166; Internet http://www.ecu=
ador.org/;
or the Ecuadorian consulate in Chicago (312) 329-0266, Houston (713) 622-17=
87,
Jersey City (201) 985-1700, Los Angeles (323) 658-6020, Miami (305) 539-821=
4,
New Orleans (504) 523-3229, New York (212) 808-0170, or San Francisco (415)
957-5921.
In
an effort to prevent international abduction of minors, many governments,
including Ecuador's, have initiated procedures at entry/exit points. These
often include requiring documentary evidence of relationship and permission=
for
the child's travel from the parent(s) or legal guardian not present. Having
such documentation on hand, even if not required, may facilitate entry or
departure.
Ecuador's specific procedures manda=
te that
minors (under 18) who are citizens or residents of Ecuador and who are
traveling alone, with one parent, or with a third party must present a copy=
of
their birth certificate and written authorization from the absent parent(s)=
or
legal guardian, specifically granting permission to travel alone, with one
parent, or with a third party. When a parent is deceased, a notarized copy =
of
the death certificate is required in lieu of the written authorization. If
documents are prepared in the United States, the authorization and the birth
certificate must be translated into Spanish, notarized, and authenticated by
the Ecuadorian Embassy or an Ecuadorian consulate within the United States.=
If
documents are prepared in Ecuador, only notarization by an Ecuadorian notar=
y is
required. This paragraph does not apply to children who enter Ecuador with =
U.S.
passports as tourists, unless they hold dual U.S./Ecuadorian citizenship.
U.S. companies that require travel =
of
foreign businesspersons to the United States should allow sufficient time f=
or
visa issuance if required.Visa applicants should consult the follow=
ing
links.
To work temporarily in Ecuador for =
more
than 60 days, U.S. service companies are required to obtain one of the
following type of visas:
Business visa: granted for renewable 3 to 6 months.
The following documents should be p=
resented
to the Ministry of Foreign Affairs, or Ecuadorian Consulates in the U.S.:
Background investigation record
Valid passport for at least 6 months
Curriculum Vitae
3 color photographs
Marriage and birth certificates, notarized and translated=
into
Spanish
Working visa: granted for renewable 1 to 2 years.
The requirements for the working vi=
sa are
the same as for business visas, with two additional requirements:
College degree and work certificate, both legalized
Legalized copies of training courses certifying technical
expertise
The requirements for the Ecuadorian
contracting company include:
Notarized financial guarantee
Deeds of incorporation
Certificates of good standing issued by the Ecuadorian
Superintendency of Companies, the Social Security Institute, and local=
IRS
Certified copy of legal representative’s power of
attorney
Copy of tax registration of Ecuadorian company
Telecommunications &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
Ecuador has a complete telephone ne=
twork
that covers almost the entire nation, including the Galapagos Islands. Large
cities and towns have relatively reliable telephone service.
In the major cities and principal
tourist locations, internet access is readily available at larger hotels and
internet cafes.The latter
typically also offer email, VOIP, telephone and fax services.
Transportation &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
There are a number of U.S. and
International airlines servicing routes from the United States to Ecuador.
Delta, Continental, American Airlines, LAN, TACA, Copa, Avianca and Santa
Barbara have a total of 112 flights arriving in Ecuador from the U.S. each
week.
Two main international airports ser=
ve
Ecuador, one located in Quito and the other in Guayaquil. Both airports are
also used for domestic flights.Local airlines including TAME, Icaro, Aerogal, Saereo and VIP offer
regular service between the principal cities of Ecuador.
Taxis are plentiful and fares are
reasonable, and are generally the most effective way of
moving around within cities. For se=
curity
reasons, the U.S. Embassy recommends that travelers use radio taxis, rather
than hailing taxis on the street.
Automobile
rental is available throughout the country, although it is quite expensive<=
o:p>
compared
to U.S. rental costs. Travelers should be aware that Ecuador has a high rat=
e
of auto
accidents, and driving is not recommended for travelers in country for short
visits.
The following is a list of important
transportation contacts along with their local telephone numbers and web
addresses.
Language &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; Return to top
Ecuador's official language is Spanish, but
Quichua, the lingua franca of the Inca Empire, is spoken by the Indigenous
population. Nine additional indigenous languages are also spoken in
Ecuador.English is spoken in=
major
visitor centers.
Health =
; &n=
bsp; =
; &n=
bsp; =
; &n=
bsp; =
; Return to top
Travelers
to Quito may require some time to adjust to the altitude (close to 10,000
feet), which can adversely affect blood pressure, digestion and energy leve=
l.
Travelers are encouraged to consult with their personal health care provide=
rs
before undertaking high-altitude travel. In particular, travelers with hear=
t or
lung problems and persons with sickle cell trait may develop serious health
complications at high altitudes.
Scuba
diving in the Galapagos Islands can be hazardous, and it is not recommended=
for
beginners. A privately owned decompression chamber opened in 2001 on Santa =
Cruz
Island in the Galapagos Islands. The Ecuadorian Navy operates a second
decompression chamber at the San Eduardo Naval Base in Guayaquil. Due to the
high cost of these services and associated emergency transportation, divers=
are
advised to obtain adequate medical evacuation and divers insurance.
Those
being treated for, or who are at risk of heart disease are advised that no
acute cardiac care is available on the Galapagos Islands.
The Ecuadorian mainland is 5 hours behind Greenwich Mean Time (GMT-5=
),
or the same as US Eastern Standard Time; the Galapagos Islands are 6 hours
behind Greenwich Mean Time (GMT-6). Ecuador does not operate Daylight Saving
Time.
Normal office hours are 9:00 a.m. t=
o 6:00
p.m
Holiday
20=
07
New Year’s day
Carnival &nb=
sp; =
Carnival &nb=
sp; =
&nb=
sp;
Holy Thursday &nbs=
p; &=
nbsp; =
;
Good Friday =
&nb=
sp;
Labor Day &n=
bsp; =
; &n=
bsp;
Battle of Pichincha &nbs=
p; &=
nbsp;
Founding of Guayaquil &n=
bsp;
Independence Day &=
nbsp; &nbs=
p;
Guayaquil Independence Day
All Souls Day &nbs=
p; &=
nbsp;
Founding of Quito<=
/span>
Ch=
ristmas
Day &n=
bsp;
January 1
February 19
February 20
April 5
April 6
May 1
May 24
July 25 (Guayaquil only)
August 10
October 9
November 2
December 6 (Quito only)=
December 25
Temporary Entry of Materials and
Personal Belongings =
&nb=
sp; Return to top
When
entering Ecuador, items brought for personal use are not subject to import
duties.This includes clothin=
g,
toiletries, toys, sporting equipment, printed material, medicines and
orthopedic equipment.
Up
to two items worth together no more than $1,500, and brought with you for
professional use during your visit are also exempt from duties.These include cameras, recording
equipment, typewriters, personal computers, radios, cassettes and compact d=
isc
players.
For additional information on temporary entry of mach=
inery
please refer to Chapter 5.
Web Resources =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return to top
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
Market Research &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Return to top
To view market research reports pro=
duced by
the U.S. Commercial Service please go to the following website: www.export.gov/marketresearch=
and click on Country and Industry Market Reports.
Please note that these reports are =
only
available to U.S. citizens and U.S. companies. Registration to the site is
required, but free of charge.
Trade Events =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; Return to top
Please click on the link below for
information on upcoming trade events.
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center
or the U.S. Department of Commerce's Trade Information Center at =
(800)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is
accurate as of the date published. However, The Department of Commerce
does not take responsibility for actions readers may take based on the
information contained herein. Readers should always conduct their own due
diligence before entering into business ventures or other commercial
arrangements. The Department of Commerce can assist companies in the=
se
endeavors.
INTERNATIONAL COPYRIGHT, U.S. & FOREI=
GN
COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED
OUTSIDE OF THE UNITED STATES.
The U.S. Commerc=
ial
Service offers customized solutions to help your business enter and succeed=
in
markets worldwide.Our global
network of trade specialists will work one-on-one with you through every st=
ep
of the exporting process, helping you to:
Target the best markets with our world-class research
Promote your products and services to qualified buyers
Meet the best distributors and agents for your products a=
nd
services
Overcome potential challenges or trade barriers
For more information on the service=
s the
U.S. Commercial Service offers U.S. businesses, please click on the link be=
low.
U.S. exporters seeking
general export information/assistance or country-specific commercial
information should consult with their nearest Export Assistance Center or
the U.S. Department of Commerce's Trade Information Center at (80=
0)
USA-TRADE, or go to the following website: http://www.export.gov.
To the best of our knowledge, the information contained in this report is a=
ccurate
as of the date published. However, The Department of Commerce does n=
ot
take responsibility for actions readers may take based on the information
contained herein. Readers should always conduct their own due diligence bef=
ore
entering into business ventures or other commercial arrangements. The
Department of Commerce can assist companies in these endeavors.<=
/p>
![](3D"Ecuador_archivos/image002.jpg")
<=
/span>